Rousseff’s exit: a boost for Brazil?

"We are hoping for a shock of capitalism' in the next two years," the head of the Brazilian stock exchange, Edemir Pinto, told the FT. Brazil's president Dilma Rousseff was dismissed from office last week by a vote in the Senate, and will be replaced by Michel Temer, "whose talk of privatisation, deregulation and fiscal discipline has cheered investors", says The Economist.

Rousseff was convicted of manipulating the national budget, but will be remembered primarily for presiding over, and compounding, Brazil's worst recession in over a century. The economy shrank by an annual 5.4% and 3.8% in the first and second quarters respectively. The end of the commodities boom has dented exports, but Rousseff's government hardly helped. It overspent wildly the annual deficit has reached 10% of GDP micromanaged, propped up favoured industries, and leant on the central bank to cut interest rates when inflation was far from under control.

Temer hopes to burnish Brazil's credentials with two main measures in the short term: a 20-year real freeze on public spending and a reform of the generous public pension system.

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Investors are far from certain that Temer "will have an easy time pushing painful measures through Congress", says Bloomberg.com. That means the rally we have seen this year, sustained by the prospect of Rousseff leaving, may falter for now. Longer term, however, Brazil remains an appealing investment. Things can hardly deteriorate much further. Indeed, an uptick in investment and commodity prices suggests that the worst could be over for the economy. The market remains one of the world's cheapest on a cyclically adjusted price-earnings ratio of under nine.

That seems reasonable for exposure to an economy with a young population, a rapidly expanding middle class and plenty of soft commodities. Two ways in are the iShares MSCI UCITS ETF (LSE: IBZL) and the JP Morgan Brazil Investment Trust (LSE: JPB).