Brazil’s political crisis has created a bottomless pit for economy

Kenneth Rapoza – Forbes, 8/11/2015

Brazil’s political crisis keeps getting surprisingly worse. The vice president, Michel Temer, has basically said he no longer supports his president, Dilma Rousseff, and added that his Democratic Movement Party (PMDB) would oppose the ruling Workers’ Party (PT) in the next election. The local currency lost another 2% against the dollar on Tuesday and is trading at R$3.50. Anyone who thought that Brazil was closer to R$2.80 than R$4.00 has to recalculate risk. Year-to-date, weak commodities, a strong dollar, and a political crisis without end, has made Brazil the worst performing BRIC market.

The iShares MSCI Brazil (EWZ) is down 26.5% year-to-date.

This is as much about politics as it is about the market itself. Brazil does not look attractive for anyone other than long term value hunters, and even those guys today are nervous about a soft coup that continues to dig a deeper hole under Latin America’s largest economy.

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