Coup attempt shakes Brazil, but long-term fallout remains unlikely

Brazil’s capital was recovering from a January 8th insurrection that saw thousands of ex-President Jair Bolsonaro’s supporters storm the country’s top government institutions. Rioters ransacked congress, the presidential palace and the supreme court in a well-organized effort that appeared to be designed to trigger military intervention. 

Security forces regained control of the main government buildings within hours of the insurrection but there have been some accusations that complicity by the military, some politicians and parts of the business community that made the abortive coup possible. Ibaneis Rocha, the pro-Bolsonaro governor of the capitol district, was suspended from his post and a supreme court judge ordered the arrest of Brasília’s public security chief, Anderson Torres.

Brazil’s bonds fell on Monday, with the yield on dollar-denominated notes rising four basis points to 6.53%, while an ETF that tracks the MSCI Brazil Index fell as much as 2.4% during early trading before paring losses. Adriana Dupita, Latin America economist for Bloomberg, said the currency, stock prices and economic activity could all suffer if political uncertainty grows, but consultancy FrontierView says short-term unrest presents minimal risk to the country’s already-established transition of power.

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