While investors in the past have been split about whether impeachment would be positive for Brazil, some now say that the decision could finally lead to a resolution of a months-long political stalemate. Rousseff’s administration has struggled to push through fiscal changes she says are needed to reverse the biggest budget deficit in more than two decades and ward off further credit-rating cuts for Latin America’s largest economy.

"This euphoric reaction of the stock market today shows how much investors are eager for some kind of solution that ends this turmoil and paves the way for the country to get back on track," Alvaro Bandeira, an economist at Banco Modal, said from Rio de Janeiro. "There’s still a lot to happen before a final settling, so we should be prepared for more volatility in the coming weeks."

The president, who started her second term in January, has been fighting for her political survival for months, leaving Congress in disarray, rattling financial markets and deepening an economic slump poised to be the worst since the Great Depression. The political crisis has made the real the worst-performing major currency in the world this year, and set stocks on pace for a third year of losses.

 

Eoin Treacy's view

At first blush the surge in Brazil’s stock market today could have been related to the Dollar’s weakness against the Euro or the fact that oil prices steadied. However if one looks at the performance of a range of other Latin American commodity exporters there is no confirming evidence for this contention. 

The impeachment of Dilma Rousseff on the other hand is a decidedly Brazilian affair and has been overhanging the market since she won the election last year. Since she was a senior executive at Petrobras during a time when avarice was consuming revenues at a depressing rate and is now the President, the obvious conflict of interest represented by her administration represents a major headwind to governance improving.

The prospect of her removal and the potential for much needed fiscal and regulatory reform being pushed through in the aftermath of that event have increased potential that the Real will hold the BRL4 region versus the Dollar. This should also help the iBovespa extend its rebound from the lower side of its nearly four-year range. 


At present the ADRS for both Banco Itau and Bradesco are firming from the region of their respective 2008/09 lows.  

This article from the Wall Street Journal highlights the fact that Rousseff is not going without a fight and as was the case before the election last year, the bullish case largely rests on her leaving office because there is scant potential for change while she is in power.