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Brazilian Nightmare Continues As Rousseff Suffers Major Setback, Impeachment Looms
One of the most important things to understand about the global EM rout is that while the laundry list of well-known issues (e.g. slumping commodity prices, slowing Chinese growth, the threat to export competitiveness from Beijing’s deval, and the possibility that the Fed will at some point raise rates) have unquestionably catalyzed the downturn, there are a number of country-specific, idiosyncratic political factors that have served to make things worse in Turkey, Malaysia, and perhaps most importantly, Brazil.
President Dilma Rousseff “enjoys” an approval rating that might as well be zero and the threat of her impeachment as well as the threat that finance minister Joaquim Levy may ultimately quit out of sheer frustration have created an enormous amount of uncertainty in an environment that was already extraordinarily volatile. The result: immense pressure on the BRL as the currency shoulders the burden of a dramatic “adjustment” in both the fiscal and current accounts.
Now, just when it looked like things were set to turn around thanks to Congress’s move to uphold most of Rousseff’s spending vetoes, paving the way for at least some semblance of a turnaround for the country’s budget deficit, things took a turn for the worst. Here’s Bloomberg:
Brazil’s audit court recommended that Congress reject government accounting practices for the first time since 1937, in a decision that could be used as legal justification to impeach President Dilma Rousseff.
All members of the court, known as the TCU, voted Wednesday to reject the president’s 2014 accounts. The government used fiscal maneuvers last year that broke Brazil’s fiscal law in order to hide a budget deficit, Augusto Nardes, the auditor responsible for examining the accounts, said. Rousseff’s legal team denies the charges.
"This situation is even worse than simply a widespread and consistent violation of the fiscal-responsibility law," Nardes said. "This shows the executive branch’s lack of respect for the national Congress."
Congress will make a final decision on the accounts. There’s no time limit for lawmakers to review the court’s recommendation, which eventually will be brought to a vote. The TCU’s decision revives threats of impeachment, raising questions about Rousseff’s survival amid the deepest recession in more than two decades and a wave of corruption probes into some of her allies.
Lower house President Eduardo Cunha, a critic of Rousseff, said last week a rejection by the TCU could "supercharge" the creation of new impeachment requests.
"Congress has and will have the last word -- always," Cunha said Wednesday.
The real, the worst performing emerging market currency in 2015, fell as much as 0.55 percent Thursday morning on the TCU decision before gaining 0.9 percent to 3.8511 per U.S. dollar at 9:22 a.m. local time.
“The real will continue to be under pressure,” said Bernd Berg, a London-based emerging-markets strategist at Societe Generale SA. “I think it will be a continuous and arduous political struggle from here and some will try to bring the impeachment proposal forward.”
And here's the full breakdown of what's been a particularly bad week for the government (again, via Bloomberg):
- Yday, Congress again delayed voting on vetoes, Supreme Court and TCU court denied request to suspend TCU auditor responsible for ruling on legality of govt’s 2014 budget, and TCU unanimously recommended that Congress reject govt accounting practices
- “This is Dilma’s week of Waterloo,” said David Fleischer, a political science professor at the University of Brasilia
- TCU report will be sent to committee formed by Congress members and ultimately sent to either senate or lower house
- Senator Rose de Freitas, president of the committee, said there is a 40-day deadline to issue preliminary report on govt’s accounts
- Committee will likely vote on accounts this year, she said
- Govt counting on Senate President Renan Calheiros to help avoid Congress rejection of accounts, which would push impeachment possibility forward: Folha de S.Paulo
- Lower house President Eduardo Cunha said yday that ruling refers to Rousseff’s first term, and doesn’t necessarily taint second term
- Govt said decision is only a preliminary result and criticizes ruling
- Govt will appeal to Supreme Court against TCU decision: Estado
- Opposition already discussing accelerating impeachment hearings: Folha
- Decision by TSE court to investigate Rousseff’s campaign financing will push PMDB towards impeachment, according to party heads: Folha
- Waiting could threaten Vice President Michel Temer, who would also be removed from office in TSE probe
- PMDB is Rousseff’s largest allied party
- Impeachment risk rises “significantly": Estado de S.Paulo
The political turmoil outlined above triggered a quick reversal in the BRL's fortunes...
... and going forward, any strength is likely to be transient and due largely to technical factors:
- BRL +0.5% at 3.8666/USD, trimming yday’s losses despite a series of govt setbacks yday that increased political uncertainty; outperformance may be flow-related as mkt liquidity thin, Bloomberg strategist Davison Santana writes.
- BM&F 1st future market depth shows reduced size of orders amid very wide spread; lack of liquidity increases volatility
- BRL move counterintuitive, which suggests a flow-related move on spot, future or PTAX fixing, local trader says
- DI curve widens 2-18 bps on steepening move, better reflecting increased risk perception than FX mkt today
So watch closely because this trainwreck may be about to get immeasurably worse. Although the people clearly want Rousseff out, the market hates uncertainty and Rousseff's exit would most assuredly serve to weigh on traders' already frayed nerves, at least in the near-term...
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I came here for the woman with the rape whistle.
I came for the titilating story.
And I still haven't left.
Almost there.
Vinegar strokes ahead.
What's the article about?
Not sure; however, the blonde is do-able. Valeu!
Hate to say it Tyler, but the BRL has been smashing higher the last couple weeks:
http://www.kitco.com/gold_currency/index.html?currency=brl&timePeriod=30d&flag=exchangeRate&otherChart=no
You do your name proud.
"Ukrainian Bride" make way for the "Brazilian Bride".. if all else fails Brazil still will have some ASSets to export.
Having experienced both, I find the Ukrainian women to be smarter, classier and more demure. The Brazilian Carioca's, however, will really rock your world, depending on which head is doing the 'thinking', LOL.
I already have a Brazilian bride, seriously. And trust me, you can't handle it.
Lucky you.... best invention out of Brazil are the wax jobs, LOL>
Thanks Tyler
You never fail to disapoint with the Brazilian hotties.
Want MOAR?
https://www.google.com/search?q=hot+soccer+fans&tbm=isch&imgil=0Q4qCurgC...
Yeah, Tyler made my morning. I love my latina's, but for a change, the Brazilian chicks are tão quente
Yeah, Tyler made my morning. I love my latina's, but for a change, the Brazilian chicks are tão quente
Do not click that link without first taking your BP meds.
Obama's future! Impeachment...or at least a long jail term with Hillary!
The penalty for treason is, and must always be, death.
Best beaches I have ever been to.
You can't be talking about the Copacabana, Ipanema or any of the other beaches around Rio due to filthy pollution on certain days when the water turnds a revolting brown/green colour and bathing is not advised.
For sure, up in the North East (Paraíba, Pernambuco, Rio Grande do Norte et al) where I am at the moment, things are different with warm, clean, calm waters all year round.
Don,t brag , you are not in the best spot!
Best beaches in B.
1) praia do sancho (F Noronha)
2) arayal do cabo(cabo frio)
3) playa grande (isla grande)
you don,t know shit ushhhh
Let's face it, Brazil beach-wise can pack its bags when comapred to the Caribbean countries. Then again you can't have everything and the country is beautiful enough as it is. Its people as much as its nature.
Anyone remember when the Brazilians were complaining about their strong currency, wishing for it to decline?
Their wishes were granted!
Now of course, they're whining again....
"Anyone remember when the Brazilians were complaining about their strong currency"
Indeed. Very noteworthy is that even when the BRL was grossly overvalued, Brazil still suffered from inflation of around 4-5% as reported by Brazil.gov (but higher in reality). Today, it's gotten worse with actual inflation around the 10-12% plus.
same as the USSA
It is Brazil we're talking about.
Is this 'liftoff?'
When will the people rise?
https://www.youtube.com/watch?v=q_qgVn-Op7Q
Come on Tyler..
She's cute, but you can do much better!
Now is when that poor guy as of a few years ago..that now has a new car..with a loan..and a new condo with a bigger loan..can survive....I think many will crash as they lose their jobs and cant pay the loans....and down the false economy goes....but hey...everyone was rich for a few years..or so they thought
Dudes needing to buy some ass or that just prefer an arrangement gonna be facing one helluva buyer's market here. Sheesh, how big will the glut be with Sugar Babies and Brazimbos and all the rest?
Sounds like obama
Just for the record, I love titties.
People who study the BRL seem to ignore that the current exchange rate for the USD BRL4 = USD1 and BRL6 = UKP1 are what's needed to get approximate PPP. In Brazil's heyday over the past 8-10 years of exporting minerals and chicken flesh to China etc, the BRL has been grossly over-valued making it uncompetitive.
What Brazil needs to do now is get used to a more accurate exchange rate and re-direct state spending towards infrastructure and domestic production, agricultural and finished goods instead of into Swiss bank accounts. And to force domestic corps to get their finger out, to reduce and/or eliminate the obscene import tax regime which serves nobody except domestic big money. Protectionism as a matter of long term economic policy simply doesn't work. Alas, the gormless socialists running Brazil can't understand this.
Corruption is to inbred into Brazil..they will never recover or help themselves...they steal it all off the top
South Africa, ANC, Zuma and their inbred worldview is next.