Brazil’s currency, the real, which had been making gains against the US dollar over the past year plummeted by more than six per cent on Thursday on media reports that the country’s president was embroiled in yet another alleged corruption scandal.
The severe plunge of the currency also caused a domino effect in the Bovespa stock market which lost 10 per cent of its value within an hour of its morning open.
Trading was halted as the stock market’s safeguards went into effect, allowing a brief reprieve for nervous investors. The stock market made small gains shortly after trading resumed making losses at press time around 9.04 per cent.
Local newspaper O Globo alleged on Wednesday that President Michel Temer, who had been beset by accusations of corruption since he took over from Dilma Rousseff last year, had been recorded talking about making payments to former House of Representatives (Chamber of Deputies) Speaker Eduardo Cunha.
Cunha, once the strongest instigator and supporter of the impeachment proceedings against former President Dilma Rousseff, was himself expelled from chambers last September on charges of lying about having a secret Swiss bank account and other allegations related to the Petrobras scandal.
He was sentenced to 15 years prison in March.
Rousseff herself was never implicated in any corruption linked to Petrobras but was impeached because of mishandling and misrepresenting the federal budget during her 2014 reelection campaign.
The charges against Temer will likely strike a blow to his economic reforms package which he has been trying to push through Congress.
While the International Monetary Fund and other organizations earlier said that Brazil was on the brink of turning the corner from nearly three years of a debilitating recession, they also warned that political instability linked to the dozens of corruption scandals involving the upper political echelon would derail any progress toward GDP growth.