- Dominating the headlines over the past few weeks is the ongoing turmoil in Brasília, with president Michel Temer charged with obstruction of justice, corruption and criminal organisation over tapes revealed in which he solicits nearly R$2 million in bribes from the meat giant JBS to buy the silence of disgraced (and imprisoned) former ally Eduardo Cunha, who is threatening to take the government down with him for a reduced sentence. The Brazilian Bar Association has opened an impeachment process against him.
- While the president refuses to step down where he will face investigation and prosecution, the constitution provides that in the event that he is removed, internal elections made by congress will decide the next president. The political investigations are finally reaching all parts of the political hierarchy, with former presidential candidate Aécio Neves facing extremely serious charges (having been stripped of his seat in the senate), ex-president Lula under ongoing investigation, and ex-mayor of São Paulo Paulo Maluf being sentenced to 7 years imprisonment for money laundering. Against this backdrop, the various factions of the congress are at loggerheads over succession plans, promising long a long period of political uncertainty to come.
- Against this backdrop, protests demanding Temer’s immediate renunciation and fresh, direct elections are gathering pace nationwide, with tens of thousands taking to the streets. Protests are being met with brutal reprisals from the armed forces at Temer’s command in Brasilia. From a media point of view, it is interesting to see that previous cheerleaders for the Temer government, and for Aécio Neves, Globo and Veja have turned harsh critics of the government. Given the huge sway these titles have on national opinion, this suggests that it will soon become difficult for Mr. Temer to continue.
- This uncertainty and political bloodletting is having an inevitable impact on Brazil’s business scenario, with the Bovespa falling by 10% at the beginning of this latest round of scandal. While the market later rallied, it is clear that investors no longer have confidence that Temer has the political capital to push through his economic reforms, nor that he will be able to carry on in his post indefinitely.
- JBS, the meat packing giant in the middle of the latest corruption scandal, has meanwhile lost 46% of its market value since January, dropping a huge 31.4% in its share price on Monday alone.
- However, in brighter news, the 60,000 jobs created in April was the highest growth since 2014, showing that while Brazil is not yet out of the woods, in the long term, the economy is slowly recovering.