SA’s future? Market surges as Brazilian President pushed closer to the exit

I’ve been engaging with a number of global fund managers lately, their calls not mine. They regard South African assets as heavily over-sold and are looking for an opportunity to buy ahead of a possible bounce. Their view is centred on the belief President Jacob Zuma’s network of patronage and confused economic policies are bad for the economy, reflected in the country’s poor growth rate and, in global currency terms, a five year contraction in GDP per capita. Getting rid of Zuma, they aver, will signal better days as much needed reforms to free up the economy replace crony capitalism. There is a similar line of thought at another BRICS member whose President is also facing the ultimate disgrace. Brazilian stocks jumped more than 3% in the Far East markets this morning after the news the country’s deeply compromised socialist leader Dilma Rousseff has been pushed closer to the exit. A special committee gave the green light for an impeachment process to go ahead next week – its vote wider than anticipated. Investors believe getting rid of Rousseff will open the way for Argentinian-type reforms. Hope Springs. Not only for Brazilians. – Alec Hogg

By Arnaldo Galvao, Anna Edgerton and Raymond Colitt

(Bloomberg) — Brazilian lawmakers pushed President Dilma Rousseff a step closer to impeachment after a committee in the lower house voted for her ouster in the first formal test of sentiment in Congress.

With a tally of 38 in favor and 27 against, a special lower house committee on Monday night recommended impeachment proceed on allegations that Rousseff bypassed Congress to illegally finance a budget deficit. The margin was wider than originally forecast, and sets the stage for a showdown when lawmakers vote on the floor of the lower house as early as Sunday, said political analyst Andre Cesar, founder of consulting company Hold Assessoria Legislativa in Brasilia who has followed Brazil’s Congress for 20 years.

Brazil's President Dilma Rousseff speaks during a press conference to announce a cabinet reshuffle at the Planalto Palace in Brasilia, Brazil, 2015. REUTERS/Ueslei Marcelino
Brazil’s President Dilma Rousseff speaks during a press conference in 2015. REUTERS/Ueslei Marcelino

“The result is still open, but the opposition is gaining ground,” Cesar said. “There is a strong anti-government sentiment.”

An exchange-traded fund of Brazilian stocks rose 3.3 percent in Tokyo following the committee decision, on investor optimism a new government will be better equipped to revive the lagging economy. The real closed before the vote, advancing the most among major currencies amid expectations the outcome would favor impeachment.

Despite the growing support for Rousseff’s ouster, the opposition still lacks the two-thirds majority needed for impeachment to pass in the lower house and advance to the Senate, according to some surveys. Several centrist legislators remain undecided whether to support Rousseff or side with Vice President Michel Temer, who would replace her and whose party abandoned the ruling alliance last month.

Read also: If Zupta stays: Brazil’s chaos, constitutional crisis shows the risk for SA

The anti-government organization VemPraRua, “To the Street,” said as of Monday afternoon there were 291 votes for and 128 against impeachment in the lower house. A group of Rousseff allies, including members of her Workers’ Party, said there were 126 votes against the president’s ouster. A survey by Estado de S. Paulo newspaper showed 298 legislators in favor of impeachment, an increase of 64 votes since April 5.

According to one senior lawmaker who spoke on the condition of anonymity, the vote could be decided by a margin of 30 votes.

Temer’s Speech

In one of several surprising twists that have marked a political crisis pushing Brazil deeper into recession, a recording on Monday leaked of Temer addressing the outlines of an administration under his leadership. Opposition legislators said the tape was evidence that Temer was conspiring to overthrow Rousseff and undermined the impeachment process.

Other potential pitfalls to a lower house vote on Sunday include government plans to challenge the impeachment process before the Supreme Court, citing among other concerns insufficient legal grounds for her removal from office. Rousseff, 68, who was imprisoned and tortured during Brazil’s two-decade military dictatorship that ended in 1985, has repeatedly denied wrongdoing and said that the push to oust her without sufficient evidence would amount to a coup.

Read also: Democracy in Brazil: Court launches investigation into “corrupt” President

Even if Rousseff were to survive impeachment, she still faces the risk of a prolonged power struggle during the remainder of her term through December 2018. Lower House Chief Eduardo Cunha said last week that he could admit nine other requests for Rousseff’s ouster. Also, the electoral court is still analyzing whether to annul her 2014 re-election on allegations it was financed with graft money, charges the administration denies.

Build-Up

Meanwhile, authorities in the capital, Brasilia, have been bracing for mass demonstrations in coming days, erecting metal barriers in the city’s main avenue to separate opposing factions. Residents of Sao Paulo could be heard banging pots and pans as well as honking their car horns immediately after Monday’s committee vote.

As of Monday afternoon, 184,000 people throughout Brazil signed up on VemPraRua’s Facebook page to demonstrate Sunday in favor of Rousseff’s ouster. The figure is similar to the number of people who signed up for demonstrations a week before the March 13 protests, which ultimately attracted over 3 million people nationwide.

Government supporters gathered in Rio de Janeiro on Monday evening to pressure legislators to stop impeachment. Rousseff’s predecessor and mentor, Luiz Inacio Lula da Silva, addressed the crowd, comparing efforts to remove the president from office to the 1964 coup that led to a military dictatorship.

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