In January, the dollar in Brazil fell 5% and ended up trading below 5.30 reais. It was in a context in which the foreign flow on the São Paulo Stock Exchange was US$5.7 billion, the highest value since December 2020.
As explained by Joelson Sampaio, professor of finance at the Getulio Vargas Foundation University, the arrival of foreign capital in the stock market and its consequent reduction in the price of the dollar has more to do with the increase in the interest rate of the Brazilian economy, than is paying more profits to investors.
“The fall of the dollar has the impact of the increase in the interest rate and less because of the electoral issue. It is true that there is a certain aversion to Bolsonaro and that the international market understands that Lula can put pressure on the fiscal part, but with some signs of stability that he is giving towards the political center, “said Sampaio.
According to projections released by the Central Bank of the neighboring country, Brazilian analysts expect inflation for this year of 5.38%, which would represent almost half of that registered in 2021 (it was 10.06%). Precisely, with the aim of moderating the price index, the market expects the BCB to raise the reference interest rate to 11.75% by the end of this year.
local impact
When analyzing the effect that a lower depreciation of the real could have on the local economy, the economic consultant Santiago Manoukian maintained that it is “more relevant to put the magnifying glass on the dynamics of the GDP, than on the dynamics of the bilateral real exchange rate.” “Historically, bilateral trade is more sensitive to the relative dynamics of both GDPs than that of the bilateral real exchange rate,” he told Ámbito.
“In general, it is estimated that for each point of GDP that Brazil grows, the Argentine economy will benefit from 0.3 points of growth. Therefore, focusing on the slowdown in growth, which is going to have an impact on our exports, is important. Above all, taking into account industrial exports”, remarked Manoukian, who added: “We must take into account that a moderation in growth in Brazil, which is estimated at 0.3%, can put pressure on imports due to excess production in Brazil. . Not only to Argentina, but to the region. Bearing in mind that last year the bilateral real exchange rate with Brazil appreciated 18%, it could help a little if Brazil depreciates less, in that sense. That is to say, that it becomes a little more expensive, if Argentina depreciates more. Because it would have that greater pressure for production that does not find demand in Brazil and could be turned to other markets, like ours, but if we depreciate a little faster and foreign goods become more expensive, that pressure could moderate.
Finally, the analyst pointed out: “That Brazil depreciates less could mean that Argentina does not lose as much competitiveness with respect to other countries: that is, there are other countries that buy from Brazil or Argentina, so if we become very expensive in the international market, we lose competitiveness against other countries. If Brazil depreciates less, taking the projections of the economists surveyed by the Central Bank of Brazil as an assumption, in that sense it would be positive for Argentina”.
local screenings
Meanwhile, in terms of market projections for the Argentine economy, according to the REM prepared by the Central Bank, inflation is expected to reach 54.8% this year, while they forecast that the annual nominal interest rate (TNA ) has a “monthly growing in the coming months” path, to reach a level of 38% in December 2022.
As for the exchange rate, analysts’ projection for December this year was $163.74 per dollar. “Thus, the variation in the nominal exchange rate forecast by the participants of the REM is 60.7% year-on-year for 2022,” said the REM.
Source: Ambito
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