News that Brazil’s federal police detained former Pres. Lula da Silva for questioning in connection with the Petrobras (NYSE:PBR) corruption scandal sparked a rally in Brazilian assets today, as investors hoped the deepening political crisis would result in Pres. Rousseff's ouster and a more market-friendly government.
Brazil's real rose more than 3% vs. the U.S. dollar before settling to a 1% gain, and the Bovespa stock index jumped 4%.
Federal prosecutors who ordered today's raids said there was evidence that Lula personally received funds from the graft scheme through work on a luxury beachside penthouse and a country home; beyond the allegations of personal perks and payoffs, prosecutors today described the former president as leading a years-long scheme to divert money from Petrobras to fund election campaigns that would keep his Workers’ Party and its allies perpetually in power.
A presidential aide called the accusations against Lula a "turning point" in the crisis, warning that if authorities do not quickly present concrete proof against Lula, "there is going to be violence in the streets. It could be a real war."
Subscribe for full text news in your inbox