07/02/2024 – 21:22
The maintenance of high interest rates and the appreciation of government bonds in the United States are among the main reasons for the rise of the dollar in Brazil, according to Renan Pieri, a finance professor at the São Paulo School of Business Administration at Fundação Getulio Vargas (FGV).
“The rise in the dollar is related to the appreciation of US government bonds, largely in the context of continued high interest rates in the United States, with the expectation of a more difficult time in the election. [presidencial]also due to the heated market there. The higher interest rates, this higher profitability of American bonds, attracts capital there and takes money out of Brazil”, he said.
The commercial dollar closed this Tuesday (2) at R$5.665, with a small increase of 0.22%. The US currency remains at its highest level since January 10, 2022, when it closed at R$5.67. The dollar has accumulated an increase of 16.8% in 2024.
Internal issues
Part of the rise in the dollar is due to internal issues, such as the financial market’s expectations regarding the announcement of spending cuts for the 2025 budget and the contingency of public funds for this year’s budget.
“Brazil’s fiscal issue means that the market is starting to believe that the government will have a lot of difficulty complying with the new fiscal framework, the primary surplus method, and therefore it will start to charge a higher premium to maintain investments here,” Pieri points out.
According to him, if this “premium” does not translate into higher interest rates, there will be an outflow of capital from the country. “Capital outflow from the country means that investors have less faith in Brazil’s long-term future.”
Political game
According to Maria Malta, professor of political economy at the Federal University of Rio de Janeiro (UFRJ), the rise in the price of the dollar is related, among other things, to the tug-of-war that large banks and financial institutions are engaging in to influence the decision on the next president of the Central Bank.
“What is happening is a pre-election political game in a context of the advance of the extreme right in the world. In this game, the financial sector intends to obtain an even greater share of the country’s income and expand its power and wealth,” he highlighted.
She adds that, for the Brazilian economic structure, the devaluation of the real improves the country’s situation “in terms of exports, lower interest rates reduce the internal costs of public debt and stimulate the taking of productive credit”.
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