Governance crisis in Rio: The impact of institutional uncertainty on the risk premium

The uncertainty surrounding the Executive branch in Rio de Janeiro, with the Supreme Court (STF) resuming the judgment on the legitimacy of the interim mandate, represents a governance bottleneck affecting fiscal predictability and the business environment. The administrative paralysis caused by the lack of defined leadership increases the state's cost of capital. With the commercial dollar at R$ 5.2043, up 2.23% in 7 days, and the Selic rate held at 14.00% p.a., investors are demanding higher risk premiums. Clareza Capital notes this as the seventh instance of institutional instability in 30 days, echoing concerns similar to those in the São Paulo Senate. As the legal framework is challenged, local asset prices fail to reflect intrinsic value, dominated by the risk of permanent capital loss. This systemic risk hampers long-term infrastructure contracts and budget execution, triggering capital flight toward defensive assets.