The market expects the exchange rate in Brazil to remain at six reais per dollar. The data comes from a consulting firm Focus in the weekly document published by the Central Bank of the neighboring country with the projections of the main consulting firms. According to Argentine analysts, Brazil appears as one of the main risks for the exchange rate appreciation process that the local currency is undergoing. Lula da Silva is betting on a tax reform and accelerated its implementation.
In 2024, the Brazilian real experienced a depreciation of 27% against the dollar. This trend intensified in the last months of the year when the exchange rate hit its historical ceiling of 6.18 reais. For the Argentine economy it is important news because It is the main trading partner and largest buyer of manufactured goods of industrial origin.
The Argentine currency is going through the opposite process. Exchange appreciation worked as a fundamental pillar for reducing inflation in 2024. To measure competitiveness, the Central Bank of the Argentine Republic (BCRA) prepares the multilateral exchange rate indexl, a comparison with a group of countries, where the most important is Brazil, which is already at lower levels than at the end of Alberto Fernández’s administration. It reaches the appreciation of 1999, the final stage of convertibility. Another threat.
The contrast between processes is quickly reflected in tourism. Tourism agencies anticipate a record season with some 2 million Argentines in the neighboring country. The images that are going viral at this time are eloquent, Brazil is cheap for Argentines.
The “6 x 1”: what the market expects by 2025
The market expects the exchange rate to remain at 6 reais per dollar during 2025. An increase compared to what it projected four weeks ago (5.85) and a stagnation compared to the previous week. The data comes from the Focus report, a weekly document published by the Central Bank of the neighboring country with the projections of the main consulting firms.
Regarding economic activityexpectations measured by GDP show a growth of 2.02%a projection that has been maintained for four weeks. According to the same report, inflation could be around 5%. In that projection there was a jump, four weeks ago the market expected 4.6%.
The report also indicates that the expectation is that the reference rate (Selic) will continue to rise. Four weeks ago they calculated a rate of 14% and now they estimate 15%. The rate increase was precisely one of the measures taken by the Central Bank of Brazil to try to stop the fall of the real during 2024.
Lula advances with his tax reform
Lula accelerated the implementation of his tax reform. On January 16, the “Complementary Law” was sanctioned that regulates the new consumption tax system. The initiative unifies five existing taxes—PIS, Cofins, ICMS, ISS and partially the IPI—into two new taxes: the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). In addition, a Selective Tax is introduced that will tax products harmful to health and the environment, such as cigarettes and alcoholic beverages.
For the former Secretary of Commerce of Brazil and head of BMJ consultants Welber Barral, simplification “will significantly lower costs” and will attract new investments. The implementation of the new system will be gradual. In 2026, a testing phase will be carried out with aliquots, in 2027 the new scheme will begin to be applied with a transition until 2033.
The debate around the tax issue continues. In recent days, the Brazilian Finance Ministerl Fernando Haddad referred to President Lula da Silva’s proposal to increase the income tax exemption threshold and conditioned it on the implementation of a minimum tax on the “super rich”a topic that was the subject of debate at the last G20 summit held in Rio.
Source: Ambito
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