Brazil’s stock markets and currency have plummeted after Michel Temer became the latest President to be plunged into scandal.
Temer allegedly approved of a plan to pay off potential witnesses in a corruption probe, according to Rio de Janeiro-based O Globo newspaper.
Investors dumped Brazilian assets as political chaos threatened to derail efforts to pull the Brazilian economy out of a two-year recession.
Read more: Dilma Rousseff impeached by Brazilian senate
The Sao Paolo-based Bovespa stock index fell by more than nine per cent at the time of writing, while the Brazilian real lost as much as eight per cent against the dollar to reach its lowest point since early December.
Temer allegedly met Joesley Batista, chairman of meat processor JBS, who recorded the meeting. Shares in JBS dived by more than 15 per cent.
Temer’s office denied the allegations, according to Reuters, but senior politicians immediately called for him to resign.
The country is still reeling from the wide-ranging Lava Jato, or “car wash” operation which revealed massive a massive bribery scandal involving senior politicians and the state oil company, Petrobras. New York-listed shares in Petrobras lost as much as 15 per cent on Wednesday.
That scandal eventually led to the impeachment and downfall of the previous President, Dilma Rousseff, after which Temer was installed as President.
The latest allegations promise another chapter of chaos in Brazilian politics at a time citizens and investors were craving certainty and economic progress.
Claudia Calich, manager of the M&G emerging markets bond fund, said: “The economy is stabilising after two years of recession, but this uncertainty – transmitted through a weaker currency, potentially less room for rate cuts and further decline in the already depressed levels of investment – could threaten this stabilisation.”
Whether Temer manages to hang on to his job or not, the economic reforms which he had pushed are now unlikely to be passed, analysts said.
Anna Stupnytska, global economist at Fidelity International, said: “General elections are unlikely before 2018 due to constitutional constraints and vested interests, leaving Congress in an unproductive stasis.”