As was widely expected, the final step of Brazil's historic impeachment process of former president Dilma Rousseff, concluded moments ago with a decision to formally impeach the former president, with 61 senators voting for her ouster, and 20 voting against.
Dilma Rousseff thus becomes the second president to be impeached in Brazil’s 31-year-old democracy, after 13 years of her party's leftist rule, paving the way for what the market hopes is a fundamental shift in economic policy.
Rouseff was previously charged for breaking the country's budget laws. As a result, the just as unpopular Michel Temer is set to become Brazil's official president until 2018. Behind the narrow allegations of breaking budget laws, what led a majority of Brazilians to back impeachment was a sense that Rousseff mismanaged the economy and was lenient on rampant corruption.
As Bloomberg reports, the decision caps a tumultuous period that began after Rousseff’s narrow re-election victory in 2014 and exacerbated the worst recession in decades.
The second impeachment since Fernando Collor was ousted in 1992 has been a traumatic experience for this young democracy, coming on top of a two-year corruption scandal and unemployment at its highest in over a decade. With his mandate as Brazil’s leader confirmed, Temer hopes he can now push more forcefully to put the economy back on track, a challenge that includes unpopular austerity measures.
Many hope that her ouster will allow the economy to finally revert to a growth path: "Reforms become easier with impeachment out of the way," said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Asset Management Plc, which oversees $420 billion. "That’s not to say it will be smooth sailing."
While some disagreed with the decision, notably Sen. Humberto Costa, from Rousseff's Workers' Party, who argued that the two issues — her removal from office and a ban from public office — be considered separately, adding that "the punishment is disproportional in relation to the crime she is accused of" it appears the Senate had its mind made up.
Janaina Paschoal, the lawyer leading the case against Rousseff, said the suspended president had committed fraud when breaking fiscal laws. "We are not dealing with a little accounting problem," she said. "The fraud was documented."
Meanwhile Rousseff told senators in a 30-minute address that"I know I will be judged, but my conscience is clear. I did not commit a crime."
Rousseff also had sharp words for her vice president, Michel Temer, who took over when she was temporarily suspended and will finish her term through 2018 if the Senate permanently removes her.
She called him a "usurper" who in May named a Cabinet of all white men in a country that is more than 50 percent non-white. Temer's Cabinet has been roundly criticized for its lack of diversity, with three ministers were forced to step down within a month of taking office because of corruption allegations.
Rousseff asserted that impeachment was the price she paid for refusing to quash a wide-ranging police investigation into the state oil company Petrobras, saying that corrupt lawmakers conspired to oust her to derail the investigation into billions in kickbacks at the oil giant.
Rousseff said it was "an irony of history" she would be judged for crimes she did not commit, by people accused of serious crimes.
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And now atteion shifts to her replacement, her former Vice President, Michel Temer, who has already seen three his ministers resign amid allegations of corruption or trying to cover up graft. The Senate chief, a member of Temer’s party, is under investigation for corruption as well. All four deny wrongdoing.
The 75 year-old constitutional lawyer also faces growing opposition within his own rank and file to unpopular austerity measures, such as caps on civil servants’ pay and cuts to pension benefits. Prospects that a rift in his coalition could deepen after impeachment has made investors more cautious and taken some steam out of the market rally.
"Temer’s ability to win parliamentary support for his fiscal reforms is now being put to the test," said Nicholas Spiro, a partner at London-based Lauressa Advisory Ltd., which advises asset managers. "This is the moment of truth for Brazilian assets."
For now, Temer is turning abroad in search of support. Wednesday afternoon, only hours after the Senate impeachment vote, he will embark on the first of a series of international trips to attract investors and show the world that he is Brazil’s legitimate leader.
The market's reaction was modest, as the vote's outcome was largely expected, and the BRL as well as the Brazilian EWZ ETF have both risen modestly following the news.