The regional outlook had not been giving good signs in recent days amid a climate of high volatility at the local level. However, the situation changed again for the regional markets.
Although the financial dollars continue to rise, one factor could help it reverse the trend. After several complex days for regional assets, the real appreciated for the second consecutive day against the dollar.
On Thursday, Brazil’s currency appreciated 1.31% to 5.4832 units per dollar, while the Bovespa index of the B3 exchange in Sao Paulo rose 0.39% to 126,155.29 points. The investment climate in Brazil improved after Lula Da Silva ratified, as did the Central Bank, that the will keep the public accounts in order.
Brazil: why the trend changed
The Brazilian president, Luiz Inacio Lula da Silvathat fiscal responsibility is a commitment of his Government, to try to put a stop to the fears of the financial market and the strong appreciation of the dollar to the detriment of the real in recent days.
“We spend money where it is necessary, we spend what is necessary on education and health, but we do not waste money; fiscal responsibility is not a word, it is the commitment of this Government since 2003 (when it first came to power) and we will keep it in check,” he said during an event on family farming at the Planalto Palace.
In the last days Lula made a series of criticisms of the high level of interest rates and the performance of the Central Bank, which in his opinion is boycotting the growth of the Brazilian economy; At the same time, the dollar appreciated sharply due to the financial market’s doubts about Brazil’s fiscal situation.
The president recently admitted that the rise of the dollar is a cause for concern and on Wednesday he met with the Minister of Economy, Fernando Haddad, to discuss possible cuts in public spending. Haddad also wanted to reassure the market saying that the exchange rate will stabilize and that the Central Bank’s management has the autonomy to take the measures it deems appropriate.
What does a depreciation of the real mean for Argentina?
The devaluation of the real accelerated the already marked appreciation of the pesowhere it increased the expectation of local devaluation that has gained strength in recent days and in that sense could delay the liquidation of foreign currency by the agricultural sector. That effect would reduce supply in the CCL market which was in high demand due to the blended dollar and would generate upward pressure in this way.
Analysts often explain that what the devaluation of the real does is affect the bilateral RER and also the RMER. In this way, The products that Brazil offers to the world become more attractive and compete with those of Argentina.
Source: Ambito
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