Brazil Vote Margin Seen Giving Boost to World's Best Markets

What's Next for Brazil if Dilma Rousseff Goes?
  • Temer's government may be bolstered by support for ouster
  • Markets have rallied this year on hopes of new administration

Brazil markets could get an extra boost Monday after the vote to impeach President Dilma Rousseff got more support than some observers had forecast, potentially strengthening Vice President Michel Temer as he looks to form a new government. In the end, 367 lawmakers voted for impeachment to move forward, more than the 342 needed.

Brazil’s stocks and its currency are among the world’s best performers this year as investors bid up the assets on speculation Rousseff’s removal would lead to a new administration better able to pull the country out of its deepest recession in a century. The impeachment motion now moves on to the Senate.

Here are the opinions of analysts and investors: 
*Leonardo Monoli, a partner at Jive Asset Gestao de Recursos, spoke in an interview late Sunday after watching the vote at a pro-impeachment rally in Sao Paulo.

“Markets will read this very positively. Since the impeachment gathered way more votes than the minimum necessary, there is an indication that Temer will start off stronger.”

“This impeachment could be the catalyst for improvement. An administration formed by respected people with good reputations should renew optimism in local assets and this positive expectation will support the ongoing correction in asset prices. Of course, markets have partially already priced in a change in government, but it will open stronger.”

Monoli forecasts that over coming months the real will appreciate to 3 per dollar, the Ibovespa will climb to 65,000 points and longer-term interest rates will fall.

*Camila Abdelmalack, the chief economist of brokerage CM Capital Markets, spoke in an interview. She was driving to Sao Paulo in the leadup to the vote, and said the festival atmosphere was evident on highways as drivers honked horns and Brazilian flags flew out of car windows.

“On Monday assets will rise, but not in an extraordinary way. The impeachment win Sunday has already been priced in, however the victory was by much more votes than anticipated and this will certainly help on the general mood.”

“Traders will be more confident and there are great changes the impeachment is approved in the Senate as well. Still, there is a lot of moving pieces, there is no clarity yet. Whoever says they know what’s going to happen is lying. Volatility will be king.”

*Rogerio Braga, a partner at asset management firm Quantitas Gestao de Recursos SA in Porto Alegre.

“From the economic standpoint, the benefits of the change in government will be more evident in the medium term. There is an ongoing adjustment which won’t be quick, the country is digesting several years of wrong policies.”

He predicts the Ibovespa will rally to 60,000 points and the real will strengthen to 3.4 per dollar in the next month.

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