Brazil: The economic consequences of impeachment

As we anticipated, Brazilian markets have so far shrugged off last night’s news that impeachment proceedings will be launched against President Rousseff. As the dust settles, the biggest consequence of the political wrangling that will inevitably follow over the coming months is likely to be further slippage on the fiscal front. It goes without saying that risks to the outlook are unusually high, but any sign of fiscal slippage would strengthen the case for further interest rate hikes by the central bank.