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Brazil markets fall as Rousseff impeachment vote annulled

Brazil markets fall as Rousseff impeachment vote annulled

SAO PAULO: Brazilian markets weakened on Monday after the acting lower house speaker in Brazil’s Congress annulled an impeachment vote, though losses were pared as investors bet the move would delay rather than prevent leftist President Dilma Rousseff’s removal from office.

The Brazilian currency, the real , weakened 1.5 percent against the US dollar, after falling about 5 percent when the news broke.

The country’s benchmark Bovespa stock index slid 2 percent while the broader MSCI Latin American stock index was down 0.8 percent, also hurt by weaker commodity prices following unfavorable economic data in China.

The impeachment process was now expected to return to the lower house, which had earlier voted overwhelmingly to oust Rousseff. Markets rose in recent weeks on expectations Vice President Michel Temer would take office and put austerity measures in place to better control public spending.

“I don’t think it derails (impeachment). I think there’s still plenty of votes in both houses to impeach, but … this process is not going to be fast and easy,” said Win Thin, head of emerging market currency strategy at Brown Brothers Harriman.

Shares of state-run oil firm Petrobras shed about 8 percent. Mining company Vale tumbled nearly 9 percent.

Waldir Maranhao, who broke with his center-right Progressive Party and voted against Rousseff’s impeachment last month, took over as acting speaker last week. He said there were procedural flaws in the April 17 vote in the chamber approving the impeachment charges against Rousseff.

“It’s by no means certain that Mr. Maranhao has the authority to return the vote to the lower house, and the ensuing confusion risks triggering a constitutional crisis,” Neil Shearing, chief emerging markets economist at Capital Economics, wrote in a research note.

The impeachment proceedings are focused on Rousseff’s alleged manipulation of public accounts and not a sweeping kickback scandal involving state oil company Petroleo Brasileiro SA, commonly known as Petrobras.

The process has been criticized because it was started by Eduardo Cunha, the former lower house speaker who was removed last week due to pending charges he took bribes.

Central bank director Altamir Lopes said the market volatility was normal given the news, while speaking at a public event in the northern city of Belem.

Shares of Brazilian meatpacker JBS fell 7 percent, also hurt by reports in newspaper O Globo that witnesses in a corruption scandal had testified the company made illegal campaign donations to Rousseff’s campaign, allegations the company denied.

Elsewhere in Latin America, Mexico’s peso weakened 1.3 percent while Chile’s peso was down 1.5 percent.

Copyright Reuters, 2016

Courtesy : BRecorder



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