The arrest of former Brazilian president Luiz Inacio Lula da Silva fueled a massive market rally but once the euphoria fades, investors will still face concerns about political chaos and an economy mired in a deep recession.
Lula’s detention for questioning in a bribery and money laundering probe and the move’s dire implications for his protege and successor, President Dilma Rousseff, sent Brazil’s benchmark Bovespa index soaring more than 5 percent, bringing its two-day gain to roughly 10 percent.
Rousseff is widely blamed by investors for spending policies that brought a ballooning budget deficit and surging inflation, problems compounded by a political crisis that has gripped the country in the 16 months since she won a hard-fought re-election as the Workers’ Party candidate.
The market rally also saw a nearly 4 percent gain in the real currency against the dollar to a six-month high of 3.65, although it later roughly halved those early gains.
Brazil Energy Insight 
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