Brazil STF crisis, Bolsonaro ally meets Gilmar Mendes

Rogério Marinho, the PL senator from Rio Grande do Norte who coordinates Flávio Bolsonaro’s campaign, met Mendes on Wednesday, according to the source article. The stated aim was to preserve dialogue with the court amid a crisis involving justices. The timing is politically sensitive. André Mendonça recently lifted the secrecy on a case involving the relationship between Moraes and former banker Daniel Vorcaro of Banco Master, after which Flávio Bolsonaro intensified criticism of Moraes and renewed his call for the justice’s impeachment.

Flávio Bolsonaro has also moved to tie Moraes to President Luiz Inácio Lula da Silva, deepening the confrontation between the opposition right and the judiciary. On a trip to Rio Grande do Sul on Wednesday, he called Moraes a “rotten orange” and argued he should be removed so he does not “contaminate” the entire court.

For markets, the immediate implication is not a direct policy shift but a broader deterioration in institutional tone. Brazil’s asset prices are highly sensitive to political noise because it can affect fiscal credibility, legislative bargaining and the odds of reform. The iShares MSCI Brazil ETF, EWZ, has rallied to $37.86 from $35.47 on July 29, but the move has left the fund near the upper end of its recent range, with a 14-day RSI at 82.7, a level that often indicates an overheated short-term trade rather than a durable new trend. The ETF is still trading just below its latest Bollinger Band upper range, suggesting investors have already priced in a fair amount of optimism.

That makes political shocks more relevant for positioning. A more combative relationship between the Bolsonaro camp and the STF could weigh on domestic risk appetite if it spills into questions over judicial independence, election rules or future policy implementation. It also matters for the Brazilian real and for local fixed income, where institutional friction can reinforce concerns about fiscal discipline and policy continuity. By contrast, investors betting on a stable center-right return to power may view Bolsonaro-aligned engagement with Mendes as a sign that the campaign wants leverage, not rupture.

The broader backdrop is not benign. Adalytica’s Global Stability Sentiment gauge stands at 44, in neutral territory but down 41 points over seven days, reflecting a sharp drop in confidence around geopolitical and political stability. That does not amount to a Brazil-specific market signal, but it underscores how quickly governance risks can amplify across emerging markets when institutional tensions rise.

For now, the key question is whether the Bolsonaro camp uses the dialogue with the court to reduce confrontation or as a tactical pause before further escalation. Investors will be watching for signs that the STF dispute narrows, because a prolonged clash would add another layer of volatility to Brazilian equities, the currency and interest-rate expectations ahead of the next election cycle.