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Currencies of emerging countries appreciate and Brazil’s real stagnates

By Hamilton Ferrari

The commercial dollar closed this Wednesday (Dec 14, 2022) down 0.27%, at R$5.30. The quotation of the US currency does not seem to follow the volatility registered on the B3 (São Paulo Stock Exchange), but the trajectory of the exchange camouflages the global weakening of the dollar.

The real has been at nil-nil with the dollar since the presidential elections, on October 30, 2022. The dollar was quoted at R$5.30 before the election. But there is an economist who calculates that the US currency should cost R$4.60, if the fiscal risks did not push the value up.

Other emerging currencies rose in the same period, such as Bolivia (+0.4%), Mexico (+0.6%), Paraguay (+0.7%), Colombia (+1.6%), Peru (+3 .7%), Uruguay (+5.4%), South Africa (+5.8%), Chile (+8.8%) and even the euro (+7.2%).

The real has been at nil-nil with the dollar since the presidential elections (Photo internet reproduction)

The survey was carried out by Austin Rating with 119 nations. Read the full text (236 KB) in Brazilian Portuguese.

The US currency cost R$5.37 this Wednesday (Dec. 14, 2022) due to internal uncertainties, but cooled with the expectation of lower interest rates in the United States.

The Fed (Federal Reserve, the Central Bank of the United States) signaled last month that it would not carry out a monetary tightening in the same intensity that was being done. This Wednesday (Dec.14, 2022), the country’s monetary authority increased interest rates by 0.5 percentage points, reducing the readjustment pace. The previous high had been 0.75 percentage points.

This movement strengthened the currencies of emerging countries, which should also benefit the real. But there was no appreciation of the real in the period.

What worries the market are the internal factors. The government supports the approval of a PEC (Proposed Amendment to the Constitution) that breaches the spending ceiling. The fiscal impact is over R$200 billion. There are uncertainties regarding the fiscal responsibility of the elected government.

The chief economist at Austin Rating, Alex Agostini, said that the pre-election period was more tense than the subsequent one. “At that time, I had very serious concerns about the inflation trend in the United States and Europe. What has been noticed more recently is that these concerns have subsided, so much so that the Fed today was more moderate in raising interest rates,” he said.

He also stated that international reserves are sufficient to cover the country’s liabilities, which mitigates the impact of the devaluation of the real. Brazil’s high real interest rates also keep investors in the country.

“The risk still pays off. And these recent devaluations mean that the market ends up signaling to the government that it doesn’t want any hobby horses [in the economy]. The financial market is taking a stand on this,” he said.


Economic consultant Zeina Latif said that the dollar has lost value against other currencies abroad since the beginning of November. The analyst said that the currency rate should be close to R$4.60 in Brazil, excluding the factors that pull the rate up, such as fiscal uncertainties.

“Again, it opened a gap between what would be expected [from the exchange rate], given the cycle of the American currency in the world. It was very open in the past with the [covid-19] pandemic, then it closed throughout this year. And, now, it has opened again,” she said. “This stability of the dollar is actually camouflaged because the American currency has lost value in the world”, she added.

She indicated that currencies that have not declined against the dollar are those that are experiencing domestic troubles in nations. “With this trajectory [of the weakest dollar in the world], the currency that is stopped, or rises a little, is hiding what is the fact that it should be falling”, declared Zeina Latif. “When we compare the real with emerging countries, we are left behind, even considering that our currency is more volatile,” she added.

Felipe Sichel, partner and chief economist at Banco Modal, said the global dollar is 6% to 7% weaker than before the 2nd round of presidential elections. He compared that, in the period, the real had a worse performance than in Peru. The Latin American country went through political turmoil after then-President Pedro Castillo dissolved Congress.

“[After] All the problems last week that we had because of the pseudo-coup by former President Castillo, the Peruvian currency in this same period is appreciating against the dollar. South Africa’s currency is appreciating. The Chilean peso is appreciating. […] That is, essentially, looking at a very wide range of currencies, Brazil is performing very poorly,” said the analyst.

The economist stated that, if the elected government were announcing measures that did not antagonize fiscal responsibility in the short, medium and long term, there was a “quite considerable” possibility of having a real that appreciated in the period.


Felipe Sichel said that the more attenuated interest rate environment in the United States is a factor for the weakening of the dollar compared to the main global currencies.

“Although we believe that there are still many challenges in the global economy, the movement of the last month and a half was a reduction of the concern that the US should have much higher interest rates [to control inflation]. This market perception that interest rates will not need to rise that much more, beyond what they have already risen, helps to take some of the momentum away from the global dollar, ”he said.

Silvio Campos Neto, economist and partner at Tendências Consultoria, said that the market is betting on a slowdown in inflation in the United States. The CPI (consumer price index) confirmed this scenario. The annual rate dropped from 7.7% in October to 7.1% in November. As it gave way, there is a trend of not so high interest rates in the US from now on.

“Not only is inflation subsiding, but the US economy itself is showing signs of worsening, opening up the perspective that the process of raising interest rates there will be ended soon, perhaps in the 1st half of next year, with an interest rate of a maximum of 5% or 5.25%”, said the economist.

Regarding the exchange rate, he stated that the real devalues against other currencies, not just against the dollar. “As other currencies are gaining from the dollar, the real is losing to these currencies,” he said.


Economic consultant Zeina Latif declared that the economic team lacks a counterpoint of visions. She defended the greater presence of technicians who are more committed to the country’s fiscal situation.

“We’ll wait, but that’s what concerns us. The impression it gives is that it is not a government that has a plan, but is trying to stretch the rope as much as possible to increase [public] spending. I hope we don’t have a continuation of that. It is a dangerous way to run the economy,” she defended.

Felipe Sichel, partner and chief economist at Banco Modal, said that there was an expectation that Lula da Silva’s elected government would adopt a more moderate tone in the economy, which is not the current perception of the market.

“There was the prospect that it would be a government that would move towards conciliation towards the center in economic terms. So much so that very important names from the economic spectrum supported the election of President Lula da Silva. We are not having that,” he declared.

The analyst said that the elected government has appointed “controversial” names for key government positions and there is a prospect for a substantial increase in spending without offsetting revenue. Sichel also criticized the forwarding of measures that “have already been tested several times in the Brazilian economy and have already proved to be failures”.

“This necessarily reflects the deterioration of risky assets in Brazil, including, obviously, the currency rate,” said Sichel.

The chief economist at Tendências Consultoria, Silvio Campos Neto, stated that the Lula da Silva government tends to be a management that bets on a national-developmentalist line, a model that has more role of the State in the economy as an inducer of economic growth.

For him, this government model reinforces public investment policies and the use of state-owned banks to improve the performance of economic activity.

“This direction is worrying, because, deep down, it carries a series of risks, not only from the point of view of economic efficiency in the allocation of resources, but mainly fiscal risks in a scenario that is already quite challenging”, said Campos Neto.

With information from Poder360

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