Doug,
Your scenario certainly is plausible but, I think it will turn out to be a mirror image of your ideas. I think Cardoso will get the administrative and SS reforms approved this year, though not the tax reform. And if he is to do it, I expect it to be done (as long as he is a 1st round winner) by early November. Therefore, after the elections there will be a 2-3 week period where nothing (reform-wise)happens and TBR will drift downward - the extent of which will depend on the US and global markets. During this window the press will publish more quotes and articles from the naysayers on Brazil.
If the SS reform is approved, you will see a sustained rally in TBR and as reform momentum follows, I expect TBR to have a shot at least 90 by year end.
Regarding your questions about likelihood of the legislature cooperating, there have been two good signs suggesting it is becoming substantially more likely than in May. First, the Congress has moved the structural reforms involving tax, SS and administrative to a fast track. Second, Brazilian political commentators are stating that an amendment to allow simple majority approval of reforms will pass. If so, the reforms are virtually certain to pass soon thereafter. |
