What's going on?
“Get outta here!” was the verdict given by Brazil’s Senate as it voted to put President Rousseff on trial. In doing so, they suspended her from the presidency (and it looks like the Senate will, in a few months, find her guilty and boot her out for good).
What does this mean?
Brazil’s economy has been roiled in recent years – but its stock market has rallied sharply this year on hopes that a change of political leadership would lead to an economic revival. Investors have now been granted the first part of that wish: Brazil’s President is, effectively, out of office. But there is a lot to be done. The country’s economy is expected to shrink by even more than it did last year.
Why should I care?
For markets: A lot rests on the shoulders of Brazil’s new leader. Vice-President Michel Temer now takes the reigns. If, as looks likely, he appoints a well-respected team to run important government finance departments, confidence in the economy could be restored. But such an outcome is far from certain. Brazil remains a country beset by corruption (the new leader is allegedly no angel himself) and entrenched high levels of government spending – both of those things, usually, harm investor confidence. Turning things around won’t be easy.
For you personally: BRICS used to be really popular. In 2010, if you weren’t invested in “emerging markets” (EM) like Brazil, Russia, India, China and South Africa (BRICS), people looked at you as if you were crazy. Well, from 2012 until early 2016, EM was one of the worst areas to be invested. As we’ve reported, this year has seen something of a rebound – but only after years of pain. It’s been a good reminder that what’s popular is often not what’s best.