Brazil's new government is already in serious trouble

For the most part, even the most shocking things that have happened in Brazil since a massive graft scandal was uncovered have been priced in by the market.

Yes, even the removal of President Dilma Rousseff (which is now basically a foregone conclusion) was priced in. In fact, the market liked it. She stood accused of trying to hide the wretched state of Brazil’s economy when she took office for a second term in the fall of 2014.

Now that the drama surrounding impeachment is over, we’ve entered a part of the story where the pundits and market watchers have yet to go. This is where we could see some real chaos as the Brazilian people find not just Rousseff’s PT party unfit, but seek a complete cleansing of their political system.

You see, the problem is that Brazil isn’t just throwing Rousseff out, letting her successor rule with a fresh Finance Minister, and moving forward to get out of its current economic recession.

No, that would be way too simple. Part of the reason why Brazilians are so angry with their government is because of a 2014 sting called Operation Car Wash. It revealed that the government was using the quasi-state oil company, Petrobras, as its personal slush fund.

Politicians and businessmen from all parties and walks of life were complicit in this corruption, and the Brazilian people — and more importantly the country’s judicial branch — want to hold them accountable for that. So instead of stopping with Rousseff, the arrests are continuing.

That is why João Cláudio Genu, a former treasurer of Rouseff’s successor Michel Temer’s Progressive Party (PP), was just arrested for graft. It’s a signal that heads will continue to roll, and it doesn’t matter which party they come from.

And then there’s the economy, stupid

What’s more, since the economy is bad, there are a bunch of pressure points that the government is hitting in order to tighten its belt. That is why Temer himself is in trouble right now. Musicians and artists, including the legendary Caetano Veloso (think: Bob Dylan status), threw a bunch of big rallies and concerts protesting the government over the weekend.

They’re mad because Temer said he would do away with Brazil’s Ministry of Culture to cut costs.

From the Washington Post:

Musicians railed against Temer at shows across Brazil this weekend, and their audiences sang for his ouster. Some chanted “Temer out” to a famous and melodramatic opera melody — its sense of impending apocalypse playing with unfounded Internet rumours that Brazil’s unpopular new leader is a Satanist.

Temer later walked back from his decision to cut the Ministry, but the chant is still a thing, according to WaPo. It should also be noted that there are Brazilians who still support Rousseff. They call Temer “golpista” — a scammer/con artist who pulled off an illegal coup against the President.

Obviously, these aren’t auspicious beginnings for the Temer administration. And after Temer, the known road for Brazilian politics ends. Economists, political analysts, and journalists alike are uncertain what it could mean for the country, and the market hates uncertainty.

So hold on to your hats.

NOW WATCH: We tested an economic theory by trying to buy people’s lottery tickets for much more than they paid

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.