Brazil’s Stock Market plummets following political scandal

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Brazil’s Stock Market plummets following political scandal

Petrobras Brasil

Brazil’s stock market is one of the biggest in the South America, position shared with Mexico’s. However, the Brazilian stock market had to cease activities on Thursday after nearly crashing.

This week, the Brazilian newspaper O Globo published that President Michel Temer was recorded by the owner of JBS –the world’s largest meat company- Joesley Batista, approving a payment intended for jailed former house speaker Eduardo Cunha to remain silent about his participation on Petrobras-Oderbrecht corruption scandal and on former Brazil President Dilma Rousseff’s impeachment.

Thus, Sao Paulo’s stock market and its corresponding index, BOVESPA, had a rough week being affected by this news.

The trading session was suspended when the index was crashing at 10.47%, a full 60,470 points. After the halt, operations were restored and the crashing was lessened to -8.35%.

Central Bank of Brazil in high alert

The Brazilian for currency policy announced the state of alert, after the harsh blow on the currency and stock exchange suffered by the country.

This report indicated that surveillance and action have as a main objective the well-functioning of the markets. There is no direct and mechanic correlation with currency policy, which shall remained focused on the traditional objectives.

However, Brazilian real has fallen 6.13% regarding the US dollar. In the trading floor and in banks foreign exchange, the price is 3.33 real per dollar.

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Marcelo Odebrecht, former Odebrecht president, now imprisoned

An EFE agency, meanwhile, published a note on the possibilities for the political crisis to worsen and the request by political leaders, including Brazilian legislators, for Temer’s resignation and process initiated by the Congress for the destitution of the current president might deepen the recession that Brazil has faced since 2015. A recession they had reduced in earlier 2017.

According to a professor of International Economy of Universidad del Pacifico, suspicion keeps arising about corruption in lower, mid and higher levels of the government, but also having Temer striking a coup d’état against the institution of Brazil economy, the greatest in South America.

It should be noted that Brazil’s GDP decreased 3.8% in 2015, its worse result in 25 years. In 2015, it decreased 3.6%, reaching two years with figures in the red column for GDP books.

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