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Brazil ETFs Swing as Rousseff Impeachment in Doubt

Brazilian equities and country-specific exchange traded funds (ETFs) have been rallying on the ouster of President Dilma Rousseff and her feckless administration.

However, the impeachment proceedings has hit a hurdle, triggering volatile swings in the emerging market.

The iShares MSCI Brazil Capped ETF (EWZ) was down 2.0% Monday after plunging as much as 7.2% earlier in the morning.

Meanwhile, the ProShares UltraShort MSCI Brazil Capped ETF (BZQ) , which takes the -2x or -200% daily performance of the MSCI Brazil 25/50 Index, jumped 3.8% on the volatility.

Related: Traders got Bearish on Brazil ETFs Ahead of Impeachment Vote

Brazilian stocks plummeted after the interim chief of Brazil’s lower house called for a new vote on Rousseff’s impeachment, acknowledging an argument that the ballot last month had procedure irregularities, Bloomberg reports.

The Senate had been scheduled to vote this week on the impeachment and whether to compel Rousseff to stand trial for using state banks to shore up government accounts.

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The Brazilian Ibovespa stock benchmark and real currency posted the biggest rallies among major markets this year on speculation Rousseff’s exit would pave the way for new government to pull the emerging market out of its worst recession in a century, fight inflation and cut fiscal deficits.

“This was never going to be a smooth and orderly process, something which is now plain for all to see,” Nicholas Spiro, a partner at Lauressa Advisory Ltd., told Bloomberg. “The sharp improvement in sentiment towards Brazil has been an emotionally fueled ’anyone-but-Dilma’ rally that never looked convincing from the start.”

Related: Brazil ETFs Roar Back as Government Incompetence Ends

Edwin Gutierrez, the head of emerging-market sovereign debt at Aberdeen Asset Management, though, argues that the lower house chief’s decision could just be a temporary setback to impeach the President.

“The House can call as many votes as it wants,” Gutierrez said. “The result will be the same every time.”

Traders have raised Brazilian bets this year on speculation that a new administration could enact a number of austerity measures and reforms to stabilize the economy. Vice President Michel Temer was expected to take over temporarily and name a new cabinet.

For more information on the Brazil ETF market, visit our Brazil category .

iShares MSCI Brazil Capped ETF