Brazil’s currency loses value compared to other currencies and the reasons lie in local economic policy, but also in an international context that changes after Donald Trump’s victory.
The devaluation of the Brazilian real accelerated in recent days and a dollar is now equivalent to 5.7 reais. And, this Wednesday in particular, after the triumph of Donald Trump in the US elections, the greenback was very strengthened, which also deepened that trend. However, the currency of the neighboring country lost a lot of value last year and the main reasons for this trend are, on the one hand, the economic policy of the Latin American giant and, on the other, of global origin.
To have a better idea of what happened to the real, the numbers are illuminating: it devalued 13.3% in the last year and, thus, While last year US$100 was equivalent to 503 reais, Today that amount is equal to 570 reais.. This is a very strong fall in a short time. And that makes traveling to Brazil cheaper today for Argentines, with a peso that appreciates against the dollar.
That would be a consequence of this dynamic, but with the focus on the causes that generated it, it is worth noting that “the first explanation for the devaluation of the real, like other national currencies, must be sought, above all, in expectations regarding the appreciation of the dollar”. This is what the economist says Pablo Ferrari to Scope and explains that, to this is added, now, “the expectation of an increase in the interest rate in the US due to Trump’s economic approach”.
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The deficit problem in Brazil
But, on the other hand, the local element also has a strong impact. “Brazil is in a process that will force it to correct fiscal distortions that, for the moment, translate into pressure on the exchange rate. The government’s fiscal deficit does not seem to please the markets,” explains Giustavo Quinatna, from PR Operadores de Cambio.
It happens that the Brazilian Central Bank began a process of tweaking interest rates with the intention of moderating the correction on the real. “I believe that everything has to do with the relaxation in the administration of the fiscal deficit,” says Quintana. Do not forget that the Brazilian economy is a strong one and has the resources to exit, “but we have to see if there is a positive reaction from the markets depending on the measures taken by the government,” warns the expert.
Source: Ambito
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