Brazil’s political crisis takes dramatic turn

Brazil’s financial markets rallied after news broke last week that former President Lula had been detained (and later released) in relation to the ongoing corruption probe at Petrobras. But this reaction is difficult to square with the reality that the political crisis in Brazil has escalated dramatically. Investors seem to be focusing on the increased chances that the current government might now fall – and overlooking the fact that the country is heading into increasingly choppy political waters.