April 21, 2016

The ongoing impeachment proceedings against Brazilian President, Dilma Rousseff have caused a near halt to the country’s grain and commodity trade as producers, processors, and traders await the outcome and the potential effect it will have on the country’s currency, reports Reuters.

If President Rousseff is indeed impeached and is forced from office, the country’s agricultural industry is preparing for a strengthening of the real, which would eliminate the global price advantage Brazilian grain has been enjoying, and which would likely cut foreign sales.

“Sellers and buyers are basically just waiting to see what is going to happen,” Fabio Meneghin, senior analyst at Agroconsult told Reuters. “Except for spot deals, there is not much going on.”

Currently, the real stands at 3.54 to the dollar, however, a change in administration to one led by the more business-forward Vice-president, Michel Temer would bring the real to 3.10 to the dollar according to a new report issued by INTL FCStone. But, if the impeachment is rejected, the real could fall to 4.10 to the dollar, creating an even greater market advantage, under which Brazil could export up to 56 million tons of grain.

Rousseff has lost a key vote in the country’s lower Congress which voted to send the motion for impeachment to the Senate which must vote to accept the impeachment within ten sessions. If a simple majority vote is returned in favor, Rousseff will be suspended for 180 days during which time the charges against her will be investigated. If however, the Senate votes in favor with a two-thirds majority vote, then Rousseff will be removed from office, reports the Guardian.

Nine ministers of Rousseff’ 31-member cabinet have resigned leaving Brazil’s government barely functional, as she herself is traveling to New York to attend a United Nations event where she will attempt to garner support against what she is calling a “coup d’état without weapons”.

Much of Brazil’s surplus exportable commodities have been sold and hedged with futures and contracts, but the industry still stands to lose an advantage if Rousseff is successfully impeached. Despite this, many within the sector are supporting the action, as an extended Rousseff administration is being seen as posing a long-term threat to the economy.