Brazil Markets Slide as Impeachment Vote Annulled

Emerging Markets Reuters

Brazil's currency weakened as much as 5 percent and stocks tumbled on Monday after the acting Lower House Speaker annulled an impeachment vote, a move seen as decreasing the likelihood of a more market-friendly government taking power.

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Brazil's benchmark Bovespa stock index slid 3 percent while the broader MSCI Latin American stock index was down 2.4 percent, also hurt by weaker commodity prices following unfavorable economic data in China.

Shares of state-run oil firm Petrobras dropped as much as 12 percent while Brazilian interest rate future jumped more than 50 basis points after the surprise development just two days before the Senate had been expected to vote to put President Dilma Rousseff on trial.

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

The impeachment proceedings were over Rousseff's alleged manipulation of public accounts and not over a sweeping kickbacks scandal focused on 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 natural given the news, speaking from the northern city of Belem.

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Shares of Brazilian meatpacker JBS fell 5 percent, also hurt by reports in local media that witnesses in a corruption scandal had testified the company made illegal campaign donations to Rousseff's campaign, allegations the company denied.

(Reporting by Caroline Stauffer; additional reporting by Alonso Soto in Belem, editing by G Crosse)

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