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International Media Highlights Ongoing Depreciation of the Real Against the Dollar, Raising Concerns About the Brazilian Economy
Real – The dollar is trading higher this Tuesday, quoted at R$ 6.186 at 11:50 AM, an increase of 0.95% compared to Monday. This movement reflects investors’ concerns regarding the fiscal package that will be voted on by the Congress and the worsening perception of risk around public finances.
Ibovespa, the main index of the Brazilian stock exchange, opened slightly higher, but the scenario remains volatile. Analysts emphasize that, in addition to the domestic fiscal situation, the global strengthening of the dollar also pressures the real.
Expectations About the Fiscal Package on Dollar Exchange Rate
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The goal is to contain fiscal mismanagement. However, the market remains skeptical. The approval of these measures is considered crucial to restore investor confidence.
As the congressional recess approaches, pressure increases. If the package is not approved, the projection for the fiscal deficit may worsen, further driving up the dollar exchange rate.
The Central Bank (BC) also released the minutes of its latest Monetary Policy Committee (Copom) meeting, highlighting the risks associated with the dollar surge and its impact on inflation.
Central Bank Intervention
In an attempt to curb the dollar’s rise, the Central Bank sold more than US$ 1.63 billion in the spot market.
The intervention temporarily eased the dollar exchange rate, but the move was not enough. Around 9:40 AM, the currency slowed down, but quickly resumed its upward trend.
The real is one of the worst-performing emerging currencies in 2024, accumulating a depreciation of 20% this year. This weakened position is attributed to fiscal uncertainties and a lack of confidence from international markets.
International Repercussions
International outlets reported on the Brazilian economic situation. Reuters highlighted the negative performance of the real, which closed at 6.09 per dollar last week. The agency noted the lack of confidence among investors, even with the Central Bank’s interventions.
The BNN Bloomberg portal pointed out that currency depreciation has been one of the main factors driving inflation. The recent rise in Selic, which reached 12.25%, reflects the need to contain inflationary risks. There are forecasts that the rate could reach 14% in March 2025, as service inflation remains resilient.
Lack of Market Confidence
President Lula also weighed in. In recent statements, he criticized the high-interest policy, calling it “irresponsible”. However, this statement did not please the market. With the budget deficit around 10% of GDP, investors view the remarks as a negative signal.
Additionally, Bloomberg highlighted the growing pessimism surrounding Brazilian assets. Since the start of the current government, increased spending has fueled concerns about fiscal sustainability.
Analyst Ian Lima from Inter Asset emphasized that the Central Bank’s interventions may temporarily curb the dollar’s advance, but do not solve the structural problem. “The dollar exchange rate is clearly on an upward path, and the government needs to act urgently,” Lima said.
Market Impacts
The depreciation of the real has direct consequences for the economy. Imports become more expensive, putting pressure on internal prices.
The increase in raw material costs also impacts the industry and agricultural production, which depends on imported inputs.
On the other hand, exporters benefit. Soy, corn, and other agribusiness products gain competitiveness in the external market with a rising dollar. However, the net effect is negative when the inflationary impact is considered.
In an interview with Reuters, economist Marcos Brito highlighted that Brazil needs to regain confidence. “The Central Bank’s targeted interventions help, but the problem is fiscal. As long as the government does not signal responsibility with the accounts, the dollar will keep rising.”
Projections for the Dollar
The dollar exchange rate is expected to remain under pressure in the coming weeks. According to economists consulted by the Central Bank, the currency may soon exceed R$ 6.20.
This week’s Focus report points to a concerning scenario: predictions of rising inflation and even higher Selic rates.
The deterioration of expectations for the Brazilian economy has led to a capital flight. International investors are seeking safer markets while the real remains weakened.
Congress will be the stage for the most important decisions in the coming days.
The vote on the fiscal package should provide some direction for the market. If approved, the government will gain time to reorganize its finances and reduce pressure on the dollar exchange rate. Otherwise, the currency may continue to rise rapidly.
FAZ O L, DEI ALL IN EM CRIPTO EM 2022 VOCES MERECEM (E EU TBM AHAHAH ) UM DOLAR ALTO
Se esse **** continuar no poder veremos o Brasil ser destruído!