“What’s really sad is that we’ve seen this movie before -- it’s on repeat,” said Paulo Bilyk, chief investment officer of Rio Bravo, a Sao Paulo-based fund with $10 billion under management.

Indeed, the unraveling of Collor’s presidency amid allegations of corruption and hyperinflation draws parallels to the current situation. Collor, the first elected president after Brazil’s dictatorship ended in 1985, was barred from holding public office for eight years after his impeachment on accusations he condoned an influence-peddling scheme run by his campaign treasurer. He was cleared of all accusations in 2014 by the Supreme Court, which cited insufficient evidence.

?Collor won re-election for the state of Alagoas from a party allied with Rousseff shortly before his appearance at a campaign stop with the President. Collor’s political base is in Brazil’s northeast, one of the poorest regions of the country, where Rousseff’s Workers Party is also popular.

Eoin Treacy's view

Governance is Everything. For a country like Brazil this is even more important now that commodities are no longer trending higher. Money swelling state coffers helps to paper over a lot of cracks. The problem is that when the flows of money reverses, in a lower commodity price environment, administrations often fail to realise that they need to improve governance in a meaningful way if investors are to be placated. Brazil under Dilma Rousseff has not demonstrated that it has grasped this fact.

The Real continues to deteriorate versus the US Dollar and a clear downward dynamic on the above chart would be required to check Dollar dominance. 

In local currency terms, the iBovespa encountered resistance in the region of the 200-day MA last week and it will need to hold the recent lows near 46,000 if an additional test of underlying trading is to be avoided. 

A number of additional Latin American markets are experiencing similar issues not least Colombia.