OREANDA-NEWS. Brazil's Democratic Movement Party (PMDB) has abandoned Brazilian president Dilma Rousseff's political coalition, shortening the odds that she will be ousted as early as May and sowing investor expectations for an economic reform-oriented successor.

Industry leaders say Rousseff?s departure could help rejuvenate Brazil's ailing economy, especially the stagnating oil and gas sector. But significant challenges remain.

After weeks of uncertainty, the PMDB today withdrew the support of its 67 federal congressman and 17 senators.

The rupture was foreshadowed by yesterday?s resignation of one of PMDB's seven cabinet ministers, and could be followed by others, including mines and energy minister Eduardo Braga.

PMDB's support was seen as vital to Rousseff's last-ditch effort to secure the 172 lower congressional house votes needed to survive an impeachment request.

The government says it has the support to defeat the impeachment, but an exodus of other, smaller parties in Brazil's fractious 513-member lower house risks further isolating the president.

Outspoken lower house president Eduardo Cunha, a PMDB member, has said an impeachment vote could happen by 14 April.

If the measure passes, Rousseff would be forced to step down and vice president and PMDB leader Michel Temer would take over, while the senate mediates for up to 120 days.

The senate, where Rousseff has traditionally had more support, could decide to immediately archive the proceedings, but that now appears unlikely.

"This sends a positive signal. Temer should be in a position to gain support for some unpopular reforms Brazil needs to help the economy and the country needs to turn the page," a local oil executive tells Argus.

The possibility of a technocratic Temer government has helped to strengthen the local currency and reverse the S?o Paulo stock exchange's recent decline.

Industry groups, most notably S?o Paulo's influential industry federation Fiesp, have been vocal in their support of the impeachment, but some analysts say the optimism is na?ve at time when the scandal has tainted much of the political establishment.

The PMDB and Rousseff's Workers' Party (PT) are alleged to be the main beneficiaries of a massive kickback scheme that bilked state-controlled oil company Petrobras. Federal police investigations have reached the highest levels of both parties, implicating several senior politicians now supporting the impeachment bid.

Rousseff chaired Petrobras in 2003-10, when most of the corruption took place, but is not currently a target of the probe. The grounds for impeachment relate to alleged manipulation of 2014 federal accounts.

A recent plea deal between former PT senator Delc?dio do Amaral and federal prosecutors included claims that both Rousseff and Temer knew of the corruption at Petrobras.

The allegations cast doubt over whether Temer himself would survive until the end of Rousseff's term in 2018.

Rousseff and Temer are also facing proceedings in the federal electorate court TSE that could result in the annulment of the 2014 elections. Those claims involve allegations that money stolen from Petrobras helped fund their 2014 campaign.

If proven, both would be removed from office, and Cunha, now under investigation in the Petrobras probe, would lead the country until new elections are called within 90 days of their removal.

The political chaos has virtually paralyzed activity in industrial sectors embroiled in the scandal, namely the oil and civil construction sectors. The latter is critical to ensuring Brazil?s readiness for the Olympic Games in Rio in August.

Investors hope Temer would revive those job-creating sectors by changing PT state-oriented policies.

Last month, Brazil's senate approved a bill that would lift a requirement that Petrobras hold a minimum 30pc operating stake in sub-salt oil projects. The bill is before the lower house and could be put to a vote in May. Rousseff was expected to sign the legislation, but was under intense pressure from her labor union base to veto it.

A change in the rule, part of controversial former president Luiz In?cio Lula da Silva's nationalist legacy, could lead to greater foreign oil investment. The government says it is analyzing a possible 2017 auction of sub-salt acreage interconnected to fields already under contract. But until it is clear who will be running the government next year, oil companies will cautiously monitor developments.

A humbled Petrobras, once seen as a model of mixed public and private-sector investment, is struggling financially and has said it would not be able to participate in a new offer of sub-salt acreage in the near future. The company is streamlining its operations, cutting staff costs and selling around $15bn in assets.

A 28 April shareholder meeting will address a corporate restructuring, including an up to 30pc cut in non-operational management staff of 5,300 and a merger of the gas and energy division with the downstream division.