In a vote whose outcome was largely expected, moments ago the Brazilian Senate concluded a marathon 21 hour session with a 55 to 22 vote to suspend President Dilma Rousseff from office to face an impeachment trial, ushering in a new government to take command of Latin America’s largest economy. Rousseff will be tried on allegations she illegally doctored fiscal accounts to mask the size of the budget deficit.
When officially notified later on Thursday morning, Brazil's first woman president will be suspended, ending 13 years of rule by the leftist Workers Party, and the "market friendly" Vice President Michel Temer will become acting president during her trial.
As Bloomberg adds, "from the moment she receives the notification, the process of impeachment for the crime of responsibility takes effect," Senate President Renan Calheiros said after voting ended. She is expected to be notified within hours, and give a press conference at 10 a.m. local time.
Rousseff, a one-time guerrilla fighter, now must step down and stand trial in the Senate, in a process that could by law last as long as 180 days and result in her permanent removal from office. Rousseff will maintain some presidential privileges such as an official residence, a salary, a security detail, personal staff and transportation. Vice President Michel Temer, 75, will take over as interim president. Many expect the switch to be permanent.
"It’s difficult to see a situation where Rousseff would be able to come back," said Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution in Washington.
Temer’s aides said he will work fast to build support by putting in place an economic team that can revive confidence amid above-target inflation, double-digit unemployment and a near-record budget deficit. He will announce new cabinet members at 4 p.m. local time.
The vote has capped nearly six months of political uncertainty since then-lower house speaker Eduardo Cunha accepted the impeachment request. Rousseff’s chances of surviving declined rapidly in recent months as a corruption probe encroached on her inner circle and the worst recession in decades eroded many of the gains that Brazilians enjoyed during the 13 years of rule by her leftist Workers’ Party. What led a majority of Brazilians to back impeachment was the sense that Rousseff both mismanaged the economy and was lenient on corruption. At its zenith, her party combined social welfare and market savvy to earn the envy of the developing world.
Ironically, leading members of Rousseff successor Temer’s Brazilian Democratic Movement Party are under investigation for the same allegations that plagued many of Rousseff’s allies, meaning the public could turn against his administration as well. Sixty-two percent of respondents in an Ibope poll last month said new elections rather than impeachment would have been the best solution to the political crisis. Backers of the Workers’ Party, which has strong ties to unions and protest movements, have already pledged to stage demonstrations and work stoppages to push for Temer’s ouster.
"Temer is going to face enormous polarization and a very angry and incredibly mobilized opposition," said Matthew Taylor, associate professor at American University’s School of International Service and former instructor at the University of Sao Paulo. "The Workers’ Party will make the current opposition look like a bunch of teddy bears."
In other words it is very possible that Brazil may find itself in a political crisis as it swings from one extreme to another, unable to form a stable government.
Meanwhile, the markets have been delighted by the impeachment process, sending Brazil's local stock market soaring in 2016, even as the local economy has slid into a depression. Investors, however, are split over whether Temer, a career politician and constitutional lawyer, can unify Brazil and revive growth. While they welcome his plan to downsize government and to make more room for the private sector, some also fear political turmoil could persist and even intensify as critics challenge his legitimacy and try to block his proposals.
For risk assets the question is whether this will be the long-overdue "sell the news" moment.