Brazilian President Michel Temer. Adriano Machado Reuters
Stocks plunged, both chambers of Congress canceled sessions, and the office of President Michel Temer canceled his planned activities in the wake of a Globo newspaper report that he had been recorded endorsing the bribery of a former lawmaker.
REEVES: That's right. And so the concept of impeachment is something that is very real in the minds of politicians here.
The new allegations of bribery are tied to that larger political crisis.
"With regards to market implications - Brazil is clearly underperforming, but this will be an opportunity to buy other emerging market assets as short-term technicals are cleared - including United States dollars shorts covered - or other credits that are uncorrelated to the Brazilian economy but are suffering in a similar fashion", Calich says. On being stripped of the presidency her vice president, Temer automatically took over.
Following Globo's report, Thursday began in a panic.
But for that to happen, Temer's powerful ruling coalition in Congress would have to turn on him. In Sao Paulo, the nation's largest city, hundreds of protesters gathered on a main avenue to demand Temer go.
Some Temer allies tried to shore up confidence, but others said his Brazilian Democratic Movement Party, or PMDB, was in tatters.
In the evening, a protest of several thousand people in Rio de Janeiro was broken up when men in masks threw objects at police, who responded with tear gas.
According to the O Globo report, the information was revealed when the owners of the meat and chicken conglomerate JBS testified before the Supreme Court behind closed doors as part of a massive corruption investigation, dubbed "Operation Car Wash", which implicates former and current politicians.
Michel Temer is the ultimate political insider who quietly and ruthlessly worked his way to the summit of Brazil's political pyramid - before finding himself teetering in spectacular fashion.
Maria de Souza, another participant in the march, said that Temer's resignation is not enough to solve the crisis. His PT government was instrumental in creating the system of corruption through its funneling of state resources to promote the growth and profits of Brazilian capitalist corporations like JBS, Odebrecht and OAS, with political payoffs coming back in return.
Temer's office has denied the allegations that he endorsed paying off a witness.
A recording of the alleged conversation was presented to prosecutors by the chairman of JBS, the world's biggest meatpacker, as part of plea bargain negotiations, the O Globo newspaper reported on Wednesday. The president released a statement acknowledging the meeting with Batista, but denied any request for payment.
Temer replied: "You need to keep doing that, OK?" Through plea bargains, in which defendants provided prosecutors with information in exchange for more lenient sentences, authorities have been able to trace a major kickback scheme from a Brasilia auto wash to the highest echelons of the government.
Investors have been counting on Mr Temer pushing through the austerity reforms, which include a raising of the minimum retirement age, so that Brazil's bloated public finances can be brought under control.
A recent survey credited Temer with only 9 percent voter endorsement for performance - below Rousseff's standing at the moment of her suspension for allegedly masking data on the depth of the country's recession.
Temer's unconcern, nearly complete concordance with what was being said was chilling. The mission of another Lula government would be to contain the growing militancy of the Brazilian working class and keep it subordinated to capitalist interests. He will have to struggle to maintain support in Brazil's Congress.
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