São Paulo – The dollar continues shooting up and closed the day at R$ 3.34 this Friday (24th). To Silvio Campos Neto, economist of Tendência Consultoria, the most recent factor to drive up the foreign exchange rate was the reduction of the primary surplus target, the savings to pay interest rates of the public debt. The dollar price is the highest since 2003.
Neto explains that it increased the perception of the market risk over the possibility of a downgrade of the Brazilian economy by the credit rating agencies. Last Wednesday (22nd), the government announced that the decline of federal revenues caused by the economy downturn took the economic team to reduce to R$ 8.747 billion (US$ 2.630 billion) – 0.15% of the Gross Domestic Product – the target if the primary surplus of the public sector for this year. Before, it was set at 1.1%.
“The natural effect of this is the increase of risk and the foreign exchange rate itself”, said Neto.
*Translated by Sérgio Kakitani
