It was a surprisingly great year for investors brave enough to put money in Brazilian stocks, even though the country spent 2016 floundering through its worst recession in a century and rocked by political instability.

Paradoxically, this year of economic crisis, presidential impeachment and unending corruption scandals in Latin America's largest economy was also a boom year for the Sao Paulo stock exchange.

The Ibovespa index gained 38.9 percent on the year, its first year in the black since 2012.

That happened despite the political turbulence caused by the impeachment of president Dilma Rousseff, a massive corruption scandal at state oil giant Petrobras, and the economy shrinking an estimated 3.49 percent -- its second year of deep recession.

The market may have gotten a confidence boost from the resolution of the drawn-out impeachment drama, which ended with the installation of center-right President Michel Temer in August.

But more importantly, analysts say, signs of a rebound for Brazil's key commodity exports gave companies like Petrobras and mining giant Vale a major shot in the arm.

Petrobras shares gained 121.9 percent on the year. Shares in Vale, the world's largest iron ore producer, rose 129 percent. And shares in steel producer Gerdau soared 189.2 percent.

"The stock market and the Brazilian real took off in 2016 compared to other world markets. I don't think that has to do with domestic matters like the political crisis or impeachment. That played a part, but it's really about commodity prices, especially oil," said Andre Perfeito, chief economist at consulting firm Gradual Investimentos.

"The Brazilian market is very sensitive to external variations because it's very large. The Brent crude price rose by 50 percent in 2016. If you compare its progress with the Sao Paulo stock market's gains in dollars, you'll see the two graphs are very similar."

- Uncertain 2017 -

Brazil's currency also registered big gains.

After hitting a record low on January 21 -- 4.166 to the dollar -- it finished trading Thursday at 3.252, up more than 20 percent on the year.

That made it the best-performing currency against the dollar in a worldwide basket followed by Gradual Investimentos.

But the firm warned the trend could be reversed in 2017.

"The average projection for end-2017 is 3.5 reals to the dollar in the (Brazilian central bank's) Focus report. And the consensus among international analysts is that the arrival of (US President-elect Donald) Trump should translate into a stronger dollar because of the US Federal Reserve's reaction to his fiscal ambitions," said the consulting firm.

Looking inward, Brazil is facing a tricky year, too.

Markets may have breathed a sigh of relief when Temer took over from Rousseff, ending months of instability.

Temer quickly launched austerity reforms meant to get the troubled economy back on track.

But his own government was soon caught up in the Petrobras scandal, which has felled several ministers accused of playing a part in the multibillion-dollar fleecing of the state oil company.

The ongoing investigation appears to pose a growing threat to Temer.

"There's a certain optimism with the new government. But the reforms are still at a very early stage, and the political question is still very delicate because of Operation Carwash," the Petrobras investigation, said Perfeito.

Brazil looks poised to finally exit recession in 2017.

But it is still a long way from the emerging markets boom of the 2000s, when it was an investor darling thanks to a "commodity super-cycle" that fueled breakneck growth.

The government is forecasting the economy will grow 0.8 percent next year.

Economists are predicting just 0.5 percent, according to the latest survey by the central bank.

Source: AFP