The development will be seen as a victory for the government in an effort to address the country's fiscal problems. The Ibovesta index rose to 96 thousand points

The social security reform bill passed its first crucial test on Tuesday (23), when the congressional committee in Brasilia voted that the proposed legislation was constitutional and could pass through Congress. The development will be seen as a victory for the current government and Economy Minister Paulo Guedes, who are spearheading the reform plan, which is seen as necessary to stabilize Brazil's fragile economy and encourage foreign and domestic investment.

Guedes hopes that the social security reform project can address Brazil's precarious fiscal position by reducing pension payments by R$1 trillion (US$255 billion). But companies across the country have also joined the bill as a test case to determine whether the government will be able to pursue its broader economic agenda, including plans for privatization and deregulation.

Markets rallied on Tuesday when news broke that the Commission on Legal and Constitutional Affairs would vote on the bill. Bovespa's benchmark index rose 1,4% to close to 96 points.

The reform package will now be reviewed by a congressional committee, before proceeding to the Chamber of Deputies and – if successful there – the Senate. Many analysts believe that the project may be approved by the third quarter of this year.