São Paulo – The depreciation of the dollar against the real (Brazilian currency) seen over the last few days on the Brazilian market should not impact strongly on the country’s trade balance. Analysts believe that the United States currency, whose value in real went from 1.72 as of last Thursday (23rd) to 1.69 today (30th), should have little or no influence on Brazilian exports and imports. Even though it was the lowest level of the last two years, the depreciation reached only 0.3%.
Adriano Gomes, a consultant at Méthode Consultoria Empresarial and Finance professor at the Higher School of Advertising and Marketing (ESPM), is one of the specialists who believe that exports and imports should not be influenced by the variation, and that the dollar should not drop much further than it already has. The Brazilian Central Bank has intervened on the market by purchasing dollars and will continue to do so.
One of the factors that led to the decline of the United States currency in Brazil over the last few days was the inflow of foreign funds into the country, as a result of Petrobras’ fundraising operation. Felipe Salto, an analyst at consultancy firm Tendências Consultoria, claims, however, that the operation should impact on the foreign exchange market by the end of next week.
The main contributing factor to the depreciation, Gomes believes, is the worldwide trend of dollar depreciation. "The dollar is melting around the world," he says. China is infusing its currency, the Yuan, into the Chinese market, in an attempt at making its products more competitive for exports on the global market. In order not to lose market share, the Federal Reserve (Fed), which is the central bank of the United States, is doing the same.
That is leading to an international decline of the dollar’s value. Gomes believes that neither China nor the United States will waiver the currency war soon, and coupled with that, there will be a strong foreign capital inflow into Brazil in coming months as a result of the pre-salt, i.e. deepwater oil drilling, which will prevent the dollar’s value from increasing much. "Petrobras is just the tip of the iceberg," says the consultant, who underscores that the pre-salt project involves many more fields and companies. In the next three months, the consultant believes that one dollar should be equivalent to 1.72 or 1.73 real.
In 2011, according to Gomes, one dollar should be equivalent to 1.70 or 1.80 real. Consultancy firm Tendências expects the dollar to be worth 1.79 real next year. The government itself should hold the currency at this level by infusing dollars into the market, so as to prevent prices from rising on the domestic market. Whenever the dollar appreciates too much, exports tend to increase, but on the Brazilian market, where imports are heated, the result is price hikes or inflation.
*Translated by Gabriel Pomerancblum
