São Paulo – Since February, Brazilian brokerage XP’s wholesale banking brand has offered to its corporate clients the opportunity to conduct direct financial transactions between Brazilian currency real and the United Arab Emirates’ dirham. According to one of the heads of foreign exchange sales at the XP’s wholesale banking business, Bernardo Bigatá, the company has “two chapters” in its history regarding the use of the dirham that came in response to client demands.
“The first one was making [dirham] available on our shelf [of currencies]. We spoke with our clients, who explained their demand for the currency. So we managed to make it available to them,” he said about the implementation of the use of dirham around a year and a half ago. Bigatá, XP’s wholesale banking brand Middle Corporate manager Bruno Gavina and economist Alexandre Maluf participated on Thursday (13) in an event powered by the Arab-Brazilian Chamber of Commerce (ABCC) in São Paulo.
“Our second chapter with the currency started earlier this year. We struck a partnership with a leading bank from the UAE, so since February we’ve been able to settle an operation and send funds directly from Brazil to the UAE without the need of a middleperson. This allows the funds to leave São Paulo and reach Dubai without the need to go through any other financial institution or third-party country,” he said. This includes export payments.
Bigatá explained that, before this partnership with the Arab bank, it was necessary to rely on the brokerage of a financial institution based in the United States. The new possibility of conducting transactions enable the companies involved to save time and money. The move also allows dealings between Brazil and other Arab countries to be made via the UAE.
XP’s economic forecasts
The currency basket XP works with also includes: Japanese yen; yuan; euro; Swiss franc; US, Canadian, Australian and New Zealand dollar; pound sterling; Mexican peso, and Sweeden, Norwegian and Danish krone.
At the same event, Maluf shared the institution’s analysis and estimation for the Brazilian economy this year. The company forecast a 2.2% growth of the gross domestic product, an official inflation at 3.7%, and US dollar at BRL 5, below the BRL 5.40 that was registered on Thursday. “If the political challenges are overcome, US dollar will go back to a BRL 5-level,” said Maluf.
On the interest rate, Maluf mentioned the global market awaits the next steps of monetary policy of the US’s Federal Reserve Board; The Fed chose on Wednesday to maintain its interest rate at 5.25-5.5%, a level that makes investors put their money on that market instead of countries like Brazil, whose Selic benchmark interest rate is now at 10.5%.
This reduces the flow of US dollars into the Brazilian market and appreciates it compared to real. “If the Central Bank [of Brazil] continues to cut the interest rate while the US[‘s Fed] remains stationary, US dollar will go up, so does inflation, and the Central Bank will have to raise the interest rate in the future. The side effect is worse,” he said.
XP’s event was part of a new project by the ABCC, the ABCC Business Breakfast offered to member companies at its headquarters.
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Translated by Guilherme Miranda
