Dilma Rousseff, Brazil's president
© Pete Marovich/Bloomberg
Brazil's President Dilma Rousseff will face impeachment proceedings in Congress, marking a deepening of the political crisis that is dragging Latin America's largest economy further into recession.

Lower house President Eduardo Cunha told reporters in Brasilia on Wednesday he has accepted one of 34 requests to impeach the president on charges that range from illegally financing her re-election to doctoring fiscal accounts this year and last. Cunha said he "profoundly regrets" what's happening. "May our country overcome this process."

The impeachment hearings could take months, involving several votes in Congress that ultimately may result in the president's ouster. Rousseff would challenge any impeachment proceedings in the Supreme Court, according to a government official with direct knowledge of her defense strategy. The presidential press office said the government will make a statement shortly.

The decision is the culmination of a week of devastating news in Brazil, including a selloff following the arrest of billionaire banker Andre Esteves and a worse-than-expected decline in gross domestic product.

Cunha's move will put the president's support in Congress to a test after government and opposition spent months trying to rally lawmakers to their sides. The move also threatens to paralyze Rousseff's economic agenda as she focuses on saving her political life rather than reviving growth.

Corruption Scandals

Accusations that top members of her party accepted bribes, coupled with surging consumer prices and rising unemployment, have driven Rousseff's approval rating to record lows. The majority of Brazilians in public opinion polls agreed that Congress should open impeachment proceedings against the president.

Cunha himself is facing allegations that he accepted kickbacks and hid the money in overseas accounts. The lower house ethics committee is considering whether to open a probe that could result in his removal from office. His decision came hours after Workers' Party members on the committee agreed to vote in favor of investigating Cunha. The speaker denies wrongdoing.

Workers' Party Congressman Wadih Damous said Cunha's actions represent an abuse of power, adding lawmakers and society will put a stop to the measures.

Brazil's biggest exchange-traded fund reversed losses and jumped 2.5 percent in New York trading after the speaker's announcement.

Impeachment Process

Backed by Brazil's leading opposition parties, the impeachment request co-drafted by former Workers' Party member Helio Bicudo accuses Rousseff of breaching Brazil's fiscal responsibility law in 2014 and 2015. It also says her campaign received funds stemming from fraudulent activities. The country's top auditors in October recommended Congress reject her accounts, saying the administration used fiscal maneuvers to hide a budget deficit last year. The government has denied wrongdoing.

"It's going to start to get interesting," said Siobhan Morden, head of Latin America fixed-income strategy at Nomura Holdings Inc. "The positive or negative interpretation depends on how long the process takes."

The petition accepted by Cunha goes to a special committee made up of all political parties that must issue a recommendation whether impeachment hearings should start.

The lower house then votes on the committee's report. If two-thirds of the deputies back impeachment, hearings would begin in the Senate. In that case, Rousseff would have to step down and hand over the reins to Vice President Michel Temer. He would remain in power if the Senate impeaches Rousseff or step aside if she is absolved.

Congressional Support

Rousseff's ruling coalition on paper has enough members in Congress to block impeachment hearings from starting in the Senate. Yet members of the alliance frequently dissent from the president. Cunha himself is a member of the largest allied party, though he said in July he would oppose Rousseff and has since orchestrated some of her biggest legislative defeats.

Brazil's political crisis intensified in late November when police arrested the government's leader in the Senate and the former head of Grupo BTG Pactual for allegedly seeking to interfere with investigations into corruption.