Late last week, we shared what may be the most concise summary of the ongoing political theater involving the impeachment process of Dilma Rousseff, who as is well known has already been impeached, but where virtually every other actor is just as guilty of corruption and/or kickbacks. To wit:
A Brazilian Supreme Court justice ruled on Thursday that the powerful lawmaker who orchestrated the effort to impeach President Dilma Rousseff must step down as he faces graft charges, ratcheting up tensions in the country.
And in a further blow to Brazil’s scandal-plagued political establishment, Vice President Michel Temer, the man preparing to take control of the government from Ms. Rousseff, had his conviction on charges of violating limits on campaign financing upheld earlier this week, a ruling that makes him ineligible to run for elected office for eight years.
The rulings are not expected to save Ms. Rousseff’s presidency. Support for her ouster remains strong in the Senate, which is preparing to vote next week on whether to remove her from office and put her on trial over claims of budgetary manipulation. But the decisions reflect the potential for greater political turmoil in the country.
Today, the story of Rousseff's impeachment took another unexpected, and sharp U-turn when moments ago, Bloomberg reported that the interim chief of Brazil’s lower house, Waldir Maranhao, accepted a request from the government's attorney general to annul the procedure that approved the impeachment motion in the house, according to reports from Folha de S.Paulo newspaper and Epoca magazine. The stated reason: procedural flaws. Maranhao also called for a new vote on the impeachment of President Dilma Rousseff, in a very unexpected move that has led to a sharp selloff in Brazilian assets.
Waldir Maranho
More details from Reuters and Bloomberg:
- LOWER HOUSE ACTING SPEAKER MARANHAO SAYS IN DOCUMENT IMPEACHMENT VOTE MUST BE ANNULLED DUE TO PROCEDURAL FLAWS
- BRAZIL LOWER HOUSE CHIEF CALLS NEW SESSION TO VOTE IMPEACHMENT
- BRAZIL HOUSE CHIEF ASKS SENATE TO RETURN IMPEACHMENT MOTION
Whether this means that Rouseff's entire impeachment process has now been derailed (arguably as a lot of money has been transferred under the table) will be revealed shortly.
And while nobody expected Rousseff to exit without a fight, if this new twist in the Brazilian political soap opera is confirmed and is actually implemented - just three months before the Rio Summer Olympics - it would mark a dramatic anticlimax to a process that was supposed to conclude with the expulsion of Dilma from the presidential seat and unveil a new (if just as corrupt) government, which has been the catalyst for a 40%+ surge in Brazilian stocks YTD, even as Brazil's economy has continued to deteriorate sharply.
The immediate result: a slump for both Brazilian stocks and the currency, both of which are sharply lower on the initial report.
Unwinding the BRL strength...
And sending Bovespa (and Brazil ETFs slamming lower)
And just like that, macro hedge funds around the globe saw their entire month of May blown up by just one headline.