Probe Into Bolsonaro’s Handling of Pandemic Adds to Market Woes

A congressional investigation of the federal government’s role in Brazil’s disastrous pandemic response is the latest headache for President Jair Bolsonaro and another source of political uncertainty for investors.

Bolsonaro fumed on Friday at Supreme Court Justice Luis Roberto Barroso, who ordered the senate to install a committee to carry on the probe. Opposition senators had obtained enough signatures to start the investigation, but Senate President Rodrigo Pacheco had ignored their request, arguing that it would add an unnecessary distraction to the country.

“This probe is a joint strategy by Barroso and leftist senators to hit the government,” the president told supporters in front of the residential palace. Instead, he said the investigation should focus on alleged misuse of federal funds to fight the pandemic by state governors and mayors.

The Brazilian real weakened more than 1% on Friday, the worst performer among emerging market currencies. Barroso’s decision “adds to political uncertainty and market noise,” said Juan Prada, a strategist with Barclays Plc.

The congressional probe is likely to increase political noise as it gives lawmakers another stage to criticize Bolsonaro’s policies. Its conclusions could be used in criminal investigations against members of his government and fuel additional calls to impeach him.

It could also make Bolsonaro more cautious when deciding to veto lawmakers’ projects in this year’s budget, according to an adviser to a cabinet member. The president needs to find a solution for the spending proposal that’s been deemed unfeasible by the economic team, which accuses lawmakers of underestimating mandatory expenditures in order to make room for their projects.

Bolsonaro has been at odds with governors and mayors who have imposed restrictions on commerce and public gatherings in a bid to slow the spread of the coronavirus, which on Thursday alone killed 4,249 Brazilians, a daily record. The president argues that the virus is here to stay and that the population has to learn how to live with it, avoiding unnecessary economic pain.

Yet 54% of Brazilians see his handling of the pandemic as bad or awful, according to a March 17 Datafolha poll that showed his popularity dropping to 30%. Under increased pressure from congressional allies and the business community, Bolsonaro recently pivoted on his stance toward vaccines: after delaying their purchases and casting doubt on their safety and efficacy, he promised to speed up the country’s immunization campaign.

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