SAO PAULO, Dec 7 (Reuters) - Brazilian markets plummeted on Thursday after President Michel Temer's administration failed to gather enough support from lawmakers to put a pension overhaul plan to a vote. A senior lawmaker said on Wednesday that the government's coalition expected to have enough votes later that day to pass the bill, which investors see as crucial to curbing public debt. But a failure to do so led policymakers to put off a decision, originally planned for Wednesday, to formally schedule the vote, suggesting that the administration might have overestimated its clout in Congress. "The market is anticipating that the pension reform will not be voted this year," said Coinvalores brokerage head of strategy Paulo Nepomuceno. Delaying the vote on the unpopular measure to 2018 would put it close to next year's elections, a move most investors see as reducing its likelihood of approval. The Brazilian real weakened 1.7 percent, its biggest one-day decline in more than a month. The benchmark Bovespa index fell 2 percent, with all stocks there declining. Yields paid on long-term interest rate futures jumped as investors demanded higher returns, but short-term contracts were flat after the central bank slashed interest rates to an all-time low and hinted at an additional, smaller reduction in February. The yield curve indicated a 60 percent likelihood of a 25-basis-point cut at the next meeting of the central bank and a 40 percent chance that it would stand pat, traders said. Other Latin American currencies mostly weakened due to expectations that the United States will push through a tax overhaul. U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.
The tax plan could boost economic growth and inflation, forcing the U.S. Federal Reserve to raise interest rates at a faster-than-expected pace in coming months. Higher U.S. rates tend to drain funds away from emerging markets.
Key Latin American stock indexes and currencies at 1320 GMT:
Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1099.12 -0.19 27.71 MSCI LatAm 2682.24 -2.11 17.06 Brazil Bovespa 71843.10 -1.95 19.29 Chile IPSA 4877.36 -0.22 17.49 Chile IGPA 24564.45 -0.2 18.47 Argentina MerVal 26470.45 0 56.46 Colombia IGBC 10843.42 0 7.06 Venezuela IBC 1354.40 0 -95.73 Currencies daily % YTD % change change
Brazil real 3.2867 -1.73 -1.14 Mexico peso 18.9275 -0.31 9.60 Chile peso 655.7 -0.36 2.29 Colombia peso 3013 -0.23 -0.38 Peru sol 3.235 -0.03 5.53 Argentina peso (interbank) 17.2525 0.25 -7.98 Argentina peso (parallel) 17.9 0.34 -6.03
(Reporting by Bruno Federowski; Editing by Lisa Von Ahn)