Brazilian Real May Stumble on Slow Impeachment, Analysts Say
(Bloomberg) -- If President Rousseff is impeached, the appreciation of Brazil’s currency may depend on the speed of the process, according to analysts.
- The two “extreme scenarios” are the president’s impeachment leading to a new govt able to restore investors’ confidence, or a longer impeachment process that could raise the risk of the govt shifting economic policy further left, Nomura analyst João Pedro Ribeiro says in a phone interview
- He says a fast shift in government could see the BRL appreciate to 3.50/USD, but given the remaining risks, Ribeiro is keeping his call for the currency at 4.20 by year-end
- If each step of a impeachment process is very slow, it will be negative for markets, says Fausto Gouveia, director at Az Legan Administradora de Recursos
- However, the BRL could strengthen to a range of 2.80-3.30/USD in a perfect scenario, with a legally unquestionable impeachment followed by a new government in favor of free-market reforms and a budget fix
- Eurasia Group has raised the odds that Rousseff won’t finish term to 55% from 40%, and upgraded Brazil’s long-term trajectory to neutral
- They say Carwash probe has reached a ’’tipping point’’; yet, Rousseff is unlikely to fall quickly and implications for reforms will depend on how and by whom she is replaced
- If Rousseff survives, pathway for reforms in 2016 will become more difficult; the ruling PT party will move more to the left as it fights for its leader Lula
- NOTE: Rousseff says domestic politics aggravating economy, see story
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HALISTER1Source: BFW (Bloomberg First Word)
People Fausto Gouveia (AZ LEGAN)
Joao Ribeiro (Nomura Holdings Inc)
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