These are "uncharted waters" for Latin America's biggest economy, says the Financial Times. This is the first time a sitting president has faced criminal charges. President Michel Temer is alleged to have taken bribes from a former CEO of a large meat-packing company, JBS.
The stockmarket slipped by 10% in mid-may when the scandal surfaced, but it has since found its feet; what's more, it is still up by 75% since January 2016. Markets apparently "no longer care about the deterioration of the country's politics into a B-grade television crime show", as the FT's Joseph Leahy puts it. That's because there is unlikely to be enough support in Congress for impeaching Temer, and he has no obvious successor. His economic team, notably the central-bank governor and finance minister, is regarded as excellent.
There should therefore still be scope for further structural reform, a process begun with a constitutional amendment to keep a lid on public spending and hence public debt accumulation. This imbroglio also proves that Brazil's inspector general, judiciary and police are free from presidential meddling, Bryan Carter of BNP Paribas Investment Partners told Forbes.com. "What other emerging market can boast such strong institutions?"
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Of course, a positive economic backdrop makes it easier to be sanguine about a market's prospects, and here Brazil has an encouraging story to tell. It is bouncing back from a nasty recession, while inflation at a decade low is facilitating interest-rate cuts. Foreign direct investment is pouring in, covering the small current-account deficit. Reasonable valuations help too. The market's cyclically adjusted price-earnings ratio of ten is still one of the lowest of all major markets.
-
British Airways revamps Avios scheme bringing down flight prices to £1With the new Avios part-payments scheme you can now bag a British Airways flight for as little as £1
-
RBS to close a fifth of branchesRoyal Bank of Scotland plans to shut 18 branches across Scotland, resulting in the loss of 105 jobs. We have the full list of closures.
