Forget, for a brief second, Donald Trump’s connections with Russia, the appointment of a Special Counsel and talk of possible obstruction of justice and even impeachment.
There’s another large country in the Americas facing a political meltdown of epic proportions, and where the term impeachment is also being bandied about: Brazil.

The nation is still reeling from its deepest recession on record, and from the impeachment of President Michel Temer’s predecessor, Dilma Rousseff, less than one year ago. The country’s economy shrank an astounding 3.6% last year following a 3.8% contraction in 2015.

Despite the crisis, Brazil’s stock price surge made it the world’s strongest emerging market in 2016. Investors were betting that Rousseff’s impeachment meant the worst of the country’s twin political and economic morasses was finally in the past.

Indeed, the finance ministry had forecast a return to growth this year. But now that corruption investigations have taken on new momentum — and touched the new president himself for the first time, the country’s prospects are again in jeopardy.

Monica de Bolle, a senior fellow at the Peterson Institute for International Economics (where I used to work) who also teaches at Johns Hopkins’ School of Advanced International Studies, strongly disagreed with the market view as it soared to new heights. Since developments have proven her correct, I touched base with de Bolle to get her thinking on the current outlook for our mutual country of origin. Here are my questions, and here answers:

Pedro da Costa: Wall Street bought heavily into Brazil after the impeachment of Dilma Rousseff in August of last year, on the expectation that things couldn’t get any worse. But it seems despite the rally the political situation has gotten worse? What exactly happened?

Monica de Bolle: After Rousseff’s impeachment, markets decided to “price off” political risk from Brazilian assets — many economists, myself included, considered this to be a risky and premature strategy, in view of the ongoing corruption probe and Temer’s association with the PT (he was Rousseff’s VP, privy to much of what was going on, as we now have come to learn). In a word: The political crisis was far from over when markets decided to precipitously declare victory.

Pedro da Costa: Is President Michel Temer at risk of impeachment?

Monica de Bolle: He is certainly at risk of being ousted. Impeachment is an option, but it’s a lengthy and messy process that would throw the country into an economic tailspin. A better solution would be to remove him — there is an ongoing investigation into illegal campaign financing in the 2014 elections, which may lead to a ruling against Temer on June 6; if that happens, the Supreme Court can swiftly oust him — and apply the principles of the Brazilian constitution. Those principles involve placing the speaker of the House in charge of the presidency for 30 days, while he calls for indirect (i.e. Congressional) elections. The elected caretaker president would be in place until October 2018, when general elections are due to take place. There is no Constitutional recourse for anticipating general elections.

Pedro da Costa: What does the political chaos mean for the prospect of meaningful economic policy or reform?

Monica de Bolle: If Temer is ousted swiftly, and indirect elections take place, there is hope that some of the reform effort could still be salvaged. It goes without saying that the interim president would need to be a savvy, squeaky clean politician, with no links to Lava-Jato or other investigations. Believe it or not, there are such persons in Brazil, though they are not numerous. Chaos would return either under impeachment or if Temer hangs on.

Pedro da Costa: Brazil’s economy was supposed to be just emerging from the worst recession in modern history. What happens now?

Monica de Bolle: Now we need responsible people to take charge and do their best to oust Temer as quickly as possible. If this does not occur, the deepest recession in history will continue.

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