HALISTER1: Brazil Impeachment Battle Costly for Market, Economy: Analysts

Brazil Impeachment Battle Costly for Market, Economy: Analysts

(Bloomberg) -- Government economic actions while President Rousseff tries to avoid her impeachment may further harm Brazilian assets and economy, analysts say.
  • “The government now is totally focused on the impeachment, not on the economy. The fiscal policy is totally uncontrolled,” Paulo Petrassi, fixed income trader at Leme Investments, says in a phone interview
  • Should president survive impeachment, she will still have low support in Congress, near record low popularity
  • Rousseff could experience a ’’pyrrhic victory’’; BRL may reach 4.50/USD, followed by drop in stocks and swap rates rise
    • Market overestimated the probability of a fast pace for the impeachment process, economist Monica De Bolle, researcher at Peterson Institute, says
    • Sees risk of fiscal deterioration as public spending expands; “everything goes” for the government to avoid the impeachment
    • Rousseff nominating ministers and giving other govt posts in exchange for anti-impeachment support represents politics turning into a ’’business desk,’’ De Bolle says
    • Govt supposed plan to cut fuel prices isn’t feasible given ’’dramatic situation’’ of Petrobras’ cash
  • NOTE: Finance Minister Barbosa said March 23 govt may post 2016 fiscal deficit of BRL96.7b and that change in fiscal goal is needed as economy faces 2nd consecutive year of contraction, hurting tax revenue
    • Folha, one of country’s main newspapers, said today President Rousseff recently defended fuel price cut and that Petrobras board member threatened to resign if the decision was implemented
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Dilma Rousseff (Federative Republic of Brazil)
Paulo Petrassi (Leme Investimentos Ltda)

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