Balance of Power: Brazil’s Earthquake

What a New Political Crisis Means for Brazil

The earth is crumbling beneath Michel Temer’s feet.

Brazilians reacted with disbelief yesterday after a newspaper reported that their president was caught on tape approving hush money. Temer was allegedly trying to keep an imprisoned politician who masterminded last year's impeachment of Dilma Rousseff from spilling more details on a corruption scandal that's rocked the country for three years.

The stock market plunged 9 percent. As night fell over Sao Paulo, residents could be heard shouting “Out with Temer” as they banged pots and pans. The scandal even had some reminiscing about the days of military dictatorship, which ended in 1985.

Temer says he won't resign and did nothing wrong. The question is whether he'll change his mind or whether Brazil is in for another long period of political chaos.

The affair is a reminder of how quickly power can drain from an unpopular president. Some allies deserted Temer almost immediately, while others threatened to resign if the allegations are proven.

For investors, it’s also a reminder of the perils of doing business in Brazil. While major Washington scandals come only once in a generation, corruption and political instability always lurk just below the surface in Latin America’s economic heavyweight.

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A demonstrator waves a flag depicting Michel Temer, president of Brazil, as a vampire during a protest in Rio de Janeiro on May 18, 2017.
A demonstrator waves a flag depicting Michel Temer, president of Brazil, as a vampire during a protest in Rio de Janeiro on May 18, 2017.
Photographer: Dado Galdieri/Bloomberg

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GUANGZHOU, Sept. 13, 2016 -- Two Chinese Air Force Su-30 fighters fly to the West Pacific, via the Bashi Strait, for a routine combat simulation drill, Sept. 12, 2016. The Chinese Air Force on Monday sent multiple aircraft models, including H-6K bombers, Su-30 fighters, and air tankers, for the drill. The fleet conducted reconnaissance and early warning, sea surface cruising, inflight refueling, and achieved all the drill's targets. (Xinhua/Fan Yishu via Getty Images)
Chinese Air Force Su-30 fighters fly to the West Pacific, via the Bashi Strait, for a routine combat simulation drill on Sept. 12, 2016.
Photographer: Xinhua News Agency/Xinhua News Agency/Getty Images

--With assistance from Kathleen Hunter.

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