Political deadlock shows Brazilian markets could get even worse

The political deadlock created by President Jair Bolsonaro could materialize Brazilian investors' worst-case scenario

Political lockdown shows Brazilian markets could get even worse
Photo: Renato P. Castilho/Shutterstock

As outgoing Justice Minister Sergio Moro leveled severe accusations of political interference in the country’s Federal Police, he wasn’t only compromising President Jair Bolsonaro — but also materializing Brazilian investors’ worst-case scenario: an institutional crisis that may paralyze the country during a recession brought about by the worst pandemic in a century.

The market’s reactions to Mr. Moro’s accusations were immediate and severe. Soon after the end of his press briefing, Brazil’s benchmark stocks index, Ibovespa, crashed by 9.5 percent — hovering just above circuit-break levels. The Brazilian Real plummeted to new record nominal lows, bringing the foreign...

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