Brasília – The appreciation of the dollar against the Brazilian real, brought about by the uncertainty surrounding the economies of Europe and the United States, should be short-lived, said the Brazilian minister of Finance, Guido Mantega, this Thursday (4th). According to him, the fact that the ongoing crisis originated in developing countries may attract capital into Brazil and curb the rise of the US currency.
“We do now know how the market will react. In the past, it was the flight to safety [withdrawal of capital from Brazil to the US and Europe]. Now, I ask myself where the safety is. Brazil surely offers that safety,” said the minister.
Even though the dollar has been equivalent to roughly 1.60 Brazilian reals over the last few days, after the decline in stock markets worldwide, the minister ruled out the risk of an exchange rate hike, which would help Brazilian exports and benefit the national industry. “I do not believe in an overshooting [excessive appreciation] of the dollar, but rather in a relative fluctuation of the exchange rate,” he declared.
The minister commented on the financial market turmoil before heading to Peru, where he will attend a meeting of the Union of South American Nations (Unasul). According to the minister, the risks posed by the international crisis to Latin America will be the main topic of the meeting.
The countries in the region, said Mantega, will discuss the adoption of joint mechanisms for economic and commercial defence, such as the establishment of a regional relief bank or the strengthening of existing institutions. Discussions will also focus on strategies for containing the flow of trade from developed countries, who take advantage of the depreciated dollar and euro to dump, into the emerging markets, products they are unable to sell in their countries of origin.
*Translated by Gabriel Pomerancblum
