The Real Falls Against Strengthening Dollar

By Anna Fitzpatrick, Contributing Reporter

SÃO PAULO, BRAZIL – The volatility of global markets stands to have ramifications the world over, and despite the recent boom in Brazil, many speculate effects will soon be felt close to home. The dollar has made a steady rise against the real during the month of September, a change that is not entirely unexpected in the current climate. Whilst economic growth is still forecasted for the coming year, inflation is seen as a problem even with major tourist events on the horizon.

As the exports sector is so important to the national GDP, the fall in value of the real will help Brazilian commodities become more competitive, but there are also fears that the increasing price of imports could release a further inflationary pressure on the economy – a pinch that will be felt by both expatriates and Brazilians.

Brazil has a reputation as an expensive place to visit and to do business, something that business development consultant Paul Camarao from The J&P Emerging Enterprises acknowledges.

“In the past years the weakening of the dollar and strength of the real has made doing business in Brazil for expats harder. Expats doing business in Brazil have not only been affected by the exchange rate, but also the overall increase in rent, food, and transportation,” Camarao told The Rio Times.

On the other hand, Camarao explains that the falling price of the real will make “investing in Brazil, whether it be starting new operations or expanding current ones, more attractive to foreigners and expats, as assets and operating expenses have become roughly seventeen percent cheaper than last month.”

President Rousseff highlighted that it was not only the real that had suffered devaluation in relation to the dollar. “There was a change in the U.S. dollar against other currencies, where the dollar had been depreciating – it is a movement of instability in the international markets,” she said in the U.S last week.

The surprise move by COPOM (the Monetary Policy Committee) to cut the SELIC rate has also contributed to the falling value of the real – though this will do little to curb inflation and won’t help with Brazil’s reputation as an expensive place.

Rennie Anthea Jackson, the owner of Aratinga Inn, a pousada in Ilha Grande, can see the benefits for the tourism industry of a strengthened dollar, especially if Brazil’s reputation as an expensive place can be challenged.

“Brazil is seen by foreigners as an expensive country in which to travel when compared with other countries in Latin America. Many of our guests express their shock (and dismay) at the cost of goods and services in Brazil. The strengthening of the dollar and a more favorable exchange rate for visitors from North America will help reduce the perception of Brazil as being an expensive destination,” Jackson says.

With the 2014 World Cup and the 2016 Olympics on the horizon, the impact of a weaker real on the tourism and development could be seen as a boost.

Jackson adds “I strongly believe that Brazil will continue to be an increasing tourist ‘Hot Spot,’ especially with the two major international events drawing closer. Here at Aratinga Inn we are demonstrating that confidence by investing further in the future of tourism – we are building two lovely, spacious new chalets which will be ready next month.”