BRASILIA: Standing beside US President Donald Trump on a crisp afternoon outside the White House in Washington this week, a smiling Brazilian President Jair Bolsonaro enjoyed a moment in the sun.
Less than three months since taking office and with the Brazilian stock market at a record above 100,000 points, the former army captain was cementing his place on the world stage. He is following his U.S. trip with visits to Chile and Israel.
Back home, however, a political, economic and market storm was brewing that would turn the week into one of the most foreboding for his young administration, which has been slow to confront the mounting challenges to his ambitious reform agenda.
Brazilian financial markets reeled at the arrest of former president Michel Temer on corruption charges on Thursday and the unveiling on Wednesday of cuts in the military budget that were much more modest than expected. An opinion poll also showed plunging support for Bolsonaro’s government.
Even before the latest developments, investors were uneasy about a global slowdown and a string of Brazilian economic indicators showing the tepid recovery from a 2015-16 recession is losing steam. The central bank took a dovish turn this week and the government cut its 2019 growth forecasts.
The Bovespa stock index shed 5 percent this week, its biggest weekly loss since August. On Friday, the 10-year bond yield jumped more than 25 basis points and the real slumped 2.5 percent, both their biggest moves since November.