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Latin America: Politics puts Brazil in a spin

The latest political scandal in Brazil spooked the markets, but didn’t bring them down. Why not?


May saw the first anniversary of Michel Temer’s presidency (he became acting president on May 12, 2016 – he did not become ‘full’ president officially until August 31, when former president Dilma Rousseff’s impeachment was finalized). It was also the month Brazil saw yet another political corruption scandal, which could yet mean that Temer does not get to mark a second year in the Planalto.

As the dust settles from revelations that could bring down the second president since the last presidential election in 2014, the reaction from international investors has been muted. True, there was a 10% fall in the São Paulo stock exchange the day after newspaper O Globo broke the story. 

The exchange’s circuit breaker was triggered. It was dramatic stuff. And the currency did fall. But they both bounced back and, even if they have not returned to the pre-Temer scandal levels, they are still pretty healthy. 

In trading early the following week, the real was moving between R$3.25 and R$3.30 to the dollar – weaker than around R$3.10

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