Brazil, Bolsonaro and the Bovespa

Brazil's last 3 presidents have not fared well legally, but its market has managed to remain stable.

Why it matters: The country's stock market has largely shaken off political turmoil as investors continue to believe in a widely unpopular pension reform current President Jair Bolsonaro has backed in an effort to repair Brazil's highly overleveraged and underfunded budget.

• Luiz Inacio Lula da Silva, who led the country until 2010, is in jail on corruption and bribery charges.
• Dilma Rousseff served until 2016 when she was impeached and removed from office.
• Michel Temer, who replaced her and served until 2018, was arrested and charged with leading a "criminal organization" that diverted 1.8 billion reais ($475.6 million) in funds yesterday.

Driving the news: Brazil's benchmark Bovespa stock index fell by nearly 4% following news of Temer's arrest, but ended the day just 1.34% lower. The country’s 10-year bond yield rose 4 basis points to 8.76% and the real currency ended little changed at 3.79 per dollar.

• Brazil's main bourse has more than doubled the performance of the S&P 500 since Rousseff's powers were suspended in May 2016, and a recent Reuters poll showed traders expect the Bovespa to rise 36.5% in 2019.
• It has risen less than 7% so far.

Yes, but: Investors' faith is being tested as the far-right Bolsonaro is fast losing popularity. The president's approval rating has declined significantly since he took office in January, falling most recently to just 34%, according to a poll by Ibope.

• The clock is ticking for the pension reform to be approved on the government's timeline. Council of the Americas reports that a survey by Metapolítica shows that to pass on time, the pension reform would have to be the fastest constitutional amendment in the history of Brazil's Congress.

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