The Brazilian political crisis deepened further Tuesday morning after the acting Lower House Speaker annulled his previous day's action of calling off the impeachment vote against President Dilma Rousseff.
Newly-appointed Speaker Waldir Maranhao had made a surprise announcement on Monday saying that due to procedural flaws in last month's vote against Rousseff, the impeachment process was canceled and had to be returned to the Lower House from the Senate.
Maranhao had claimed that Rousseff never had an opportunity to defend herself and thus the impeachment vote was therefore illegitimate. The Senate, meanwhile, had responded by saying that Wednesday's vote against Rousseff would go ahead, despite Maranhao's order.
However, in the latest twist, Maranhao canceled the annulment and said the impeachment vote would go ahead as planned on Wednesday, reported Dow Jones.
"It's about internal politics of the Congress and internal coalition politics," Jimena Blanco, head of Americas at Verisk Mapelcroft, told CNBC. "It has to do with Waldir Maranhao trying to lend a hand to the government, maybe looking for some delays in the process, maybe creating a bit of confusion — also giving a bit more weight to the government's argument that this is a coup taking place."
Rousseff has accused the previous Lower House Speaker, Eduardo Cunha, of being the driving force behind her impeachment process. He was removed from duty last week due to corruption charges.
However, Maranhao — who acquired the position Cunha was stripped of — is himself also being investigated for corruption, reported The Guardian.
Vice-President Michel Temer, who ran in a coalition pact with Rousseff in 2014, will effectively become president of the country if Rousseff is impeached. Many view him as more business friendly and able to help steer Brazil out of its deepest recession in over two decades.
Rousseff has accused him of orchestrating the so-called 'coup,' behind her impeachment, however. Should she be impeached on corruption charges, he would also likely be implicated as he ran on her ticket in 2014 — when she is accused of tampering with government numbers to make her re-election campaign stronger — a charge she denies.
Brazil, beset by financial woes along with political scandal, was hit with another blow last week when its sovereign debt was downgraded by credit ratings agency Fitch to a 'BB' from a 'BB+' along with being given a negative outlook. Fitch stated that the "continuing deep economic contraction reflects the high level of political uncertainty" in the country.
The Bovespa index was down nearly 5 percent in the past week, and the real dropped sharply against the dollar on the latest developments.
Mark Phelps, CIO of Global Concentrated Equities at AllianceBernstein, told CNBC on Tuesday: "I have to say the Brazil situation is almost un-investable. You don't what you're getting from the political environment."
Blanco agreed, telling CNBC that the volatility is "not going to end with the potential removal of Rousseff — this up-and-down is going to continue."
Brazil must replace the president, but that will be insufficient to save its economy from its steep recession, the head of emerging market macro at Invesco said on Tuesday.
"The impeachment is necessary, but it is far from sufficient," Arnab Das said at the LatinFinance investors' forum in London.
"We need to face this: Brazil is in a depression … It is the worst performance in modern Brazilian history," he later added.
Das said if Rousseff went and there was hope of reforms, "What the market will end up doing is reassessing the growth rate upward significantly."
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— With contribution from CNBC's Katy Barnato.