Brazilian Real Faces Renewed Political Risk Beyond Reforms
(Bloomberg) -- Clash between Brazilian lawmakers and members of the judiciary is leading BRL to underperform, reflecting perception of more political risk other than just approval of reforms.
- Outlook for 2018 election and even the stability of the still strong Temer administration may be influenced by current crisis, damaging investor confidence, Rafael Cortez, political scientist at Tendencias Consultoria, says
- Temer experiences a “paradox”; on one hand, he can’t support the lawmakers against prosecutors and judges that are conducting probes against corruption, as this support could damage his popularity; and on the other, the president needs Congress to support a “heavy reforms agenda”
- In short term, the clash may not be a risk that reforms don’t get passed; lawmakers need to help Temer to make a good government, as they will face election in 2018
- However, as Temer hesitates to support judiciary anti- corruption actions, he may be weakened politically even if reforms get passed; in this case, there will be open door for an “anti-establishment” candidate in 2018, which may raise uncertainties among investors and make it more difficult economy to rebound
- Ongoing political noise and investigations risk generating a “bitter taste” for investors as the year ends, opposite of what they were expecting after impeachment, says Italo Abucater, the head of foreign-exchange trading at Icap Brasil
- “This chaotic year just won’t end, its one bombshell after another”
- “These political tensions and protests are souring the mood, along with the Zelotes probe”
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Italo Abucater (ICAP PLC)
Michel Temer (Federative Republic of Brazil)
Rafael Cortez (Tendencias Consultoria Integra)
To de-activate this alert, click
hereUUID: 7947283