Latin America

There’s 100% chance that Brazil’s President Michel Temer will leave before end of mandate: Analyst

Brazilian uncertainty opens up opportunities for investors: Pro
Brazilian uncertainty opens up opportunities for investors: Pro

The latest political scandal to hit Brazil is likely to put an end to President Michel Temer's term before the end of 2018, an analyst told CNBC on Monday.

Michel Temer has been under growing pressure to resign since new corruption allegations emerged last week. Temer said a tape, which appeared to show the president condoning the payment of hush money to a lawmaker, was doctored. Anti-Temer protestors took to the streets over the weekend and Brazil's bar association has voted to back Temer's impeachment.

"Very few people believe that he's going to stay in until the end of his term in end of 2018," Marcos Casarin, head of Latin America macro research at Oxford Economics, told CNBC, stating that there's a "100 percent" chance Temer will leave before the end of his mandate.

"He's obviously going to deny the facts but the recordings are quite conclusive and they were made public on Thursday evening and Friday and I think everyone has made up their minds and had enough time to digest the news," Casarin said.

Temer took the helm of the Brazilian presidency following the impeachment of former President Dilma Rouseff, also due to bribery allegations.

Market reaction

The fresh round of political turmoil in Brazil sent assets lower last week, with state-owned firms Petroleo Brasileiro (Petrobras) and Banco do Brasil being hit the most.

However, Casarin believes that the political scandals do not mean lack of opportunities for investors.

"It opens opportunities for investors because Brazilian assets have undergone a massive rally since the start of the year, pretty much since Trump's election…these assets are substantially cheaper right now," he noted.

Assuming Temer leaves office before 2018, Brazil has more chances to push through key reforms, he said.

"Having a president that's weakened isn't necessarily good so having another president that is market friendly and (or) a technical guy who could push through reforms and put the congress together to try to vote the reform agenda before 2018 elections (is good for markets,) he added.

According to IG, the Brazilian benchmark is expected to open slightly lower on Monday, after having hitting a 9-year low last week.