Brazil’s stock market plunges after corruption claims

Brazil's stock market plunges after corruption claims

Brazil’s Bovespa stock market was briefly halted as investors reacted to corruption allegations against Brazilian president Michel Temer.

Stocks plunged more than 10% at the start of trading, prompting circuit breakers to kick in and halt dealings.

President Temer was forced to deny a newspaper report that he gave consent to paying off a witness in a huge corruption scandal.

Investors are concerned that Mr Temer’s reform plans could be derailed.

On Wednesday night, the O Globo newspaper reported that Mr Temer was recorded discussing payments to former House Speaker Eduardo Cunha.

Mr Cunha is serving a jail sentence in connection with the corruption scandal that engulfed the Brazilian oil giant Petrobras.

Brazil's stock market plunges after corruption claims

Two MPs have filed impeachment proceedings against the president.

And on Thursday senator Aecio Neves, an important ally also accused in the tape recording, was suspended from Congress and had his house raided by the police.

Mr Temer’s office said he had never requested payments to Mr Cunha.

Mr Cunha was jailed for 15 years in March for corruption, money laundering and tax evasion, after a major investigation – dubbed Operation Car Wash – into corruption at the state oil company.

He led the impeachment process against former president Dilma Rousseff, and was one of Brazil’s most powerful politicians before his arrest.

Almost a third of the cabinet is under investigation for alleged corruption.

Analysis: Daniel Gallas, BBC South America business correspondent

“I’ve never seen anything like this”, said one trader with decades of experience.

Trading was delayed in Sao Paulo’s stock exchange and once it opened the circuit breaker stopped all operations within just a few minutes. That has not happened since the global financial crisis of 2008.

In a fortnight Mr Temer was about to start pushing his economic reform plan through Congress.

Until yesterday markets were very optimistic – but now many don’t see how Mr Temer can keep his job if the allegations about a tape in which he condones a bribe payment are true.

What happens next? If Mr Temer keeps his job, he will need a Herculean effort to get Congress behind him again. If not, the Brazilian Congress will have to chose a new president indirectly.

Getting reforms approved is no longer a top priority for a country still in deep crisis.

Source: BBC News

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