February 27, 2013
Andre Soliani & Joshua Goodman, Bloomberg, 02/27/2013
As the currency war intensifies in the developed world, the Brazilian official who coined the phrase says for his country it’s softened.
Brazil succeeded in reducing swings in the real after letting the currency depreciate 19 percent in the two years ending in December to protect local manufacturers from foreign competition, Finance Minister Guido Mantega said in an interview. Now with the real hovering around 2 per dollar, Brazil is abandoning policies to depress the exchange rate even as Japan weakens the yen and the U.S. sticks to policies Mantega has said spurred the start of the currency war.
“We haven’t resolved it, but we neutralized, softened the currency war issue that other countries are facing,” Mantega, 63, said at Bloomberg’s headquarters in New York. “We are in Brazil in a transition to a more solid, competitive and efficient economy.”
January 30, 2013
Raymond Colitt & Matthew Malinowski – Bloomberg, 01/30/2013
Brazil’s government is ready to prevent the exchange rate from having exaggerated gains, Finance Minister Guido Mantega said today, after the real this week strengthened to beyond 2 per dollar for the first time since July.
The real shouldn’t be used as a tool to reduce prices, and a weaker currency helps make domestic industry more competitive, Mantega said.
Brazil’s exchange rate had the third-biggest gain amid major currencies this year as traders anticipated the central bank would allow the real to strengthen in a bid to tame consumer prices. Today, after Mantega said the policy adopted since 2010 of keeping the currency weaker isn’t changing, the real reverted earlier gains and dropped.
January 29, 2013
Luciana Otoni – Reuters, 01/29/2013
Brazilian policymakers have allowed the real to strengthen past the 2-per-dollar mark as part of a strategy to cheapen imported capital goods and boost much-needed investment in industry, a source at the Finance Ministry said on Tuesday.
A second source on President Dilma Rousseff’s economic team stressed that the government will not allow the currency to appreciate too rapidly against the dollar nor to return to levels seen early last year, when the real at 1.7 per dollar posed a threat to Brazilian exporters.
Both sources spoke on condition of anonymity.
The Finance Ministry source downplayed the impact of the strengthening currency on inflation.
September 6, 2012
Brazil’s government has hiked import tariffs on 100 products to help protect domestic industry from foreign competitors.
The move has increased worries the globe’s No. 6 economy will increase trade protectionism as its economy sputters amid the continued global slowdown.
But Trade Minister Fernando Pimentel says hiking tariffs on most of the products to 25 percent is within Brazil’s rights as defined by the World Trade Organization. He says tariffs compensate for price differences on the products caused by continued doldrums amid the world’s top economies.
March 13, 2012
Brazilian Minister of Finance Guido Mantega announced nearly $32 billion in spending cuts to its 2012 budget (AFP, Evaristo Sa)
- A long-time advocate of more development spending in Brazil, Mantega’s tenure at the Finance Ministry was renewed by President Dilma Rousseff when she took office on Jan. 1, 2011.
- Mantega presided over Brazil’s rapid economic rebound from a global financial crisis in 2008 and 2009. Brazil’s economy, Latin America’s largest, grew 7.5 percent in 2010, its fastest pace in over two decades, though growth slowed to 2.7 percent in 2011.
March 2, 2012
Kenneth Rapoza – Forbes, 03/01/2012
Anyone who follows Brazil closely should know by now that whenever the Brazilian real hits 1.70 to the dollar, alarm bells go off in the Finance Ministry. It will only be a matter of time before the government intervenes to weaken the real. It’s not a 100% guarantee, though close enough. But if external forces like excess liquidity leading to high commodity prices are in play, then the real will strengthen and the government will be on hair-trigger alert to do something about it. Brazil is getting expensive, and the government does not want to be priced out of the export markets.
As expected, the Brazilian government followed through by extending the 6% financial operations tax, or IOF, on dollar loans from two to three years. This follows from a torrid start to the year, where the Central Bank of Brazil’s data shows that up to February 24 overall inflows to Brazil equaled $12.5 billion this year. The move also follows from last Tuesday’s presentation by Central Bank president Alexandre Tombini before the Senate, where a surprisingly large part of the discussion was dedicated to the possible negative effects of excessive capital inflows and the still very high interest rate spread between Brazil and other major economies.
Brazil’s interest rates are coming down, but in the local economy they are still over 10%. Local currency bonds pay nearly 12% depending on the maturity date. That’s high, even as Brazil’s risk is coming off. For example, in the sovereign debt market (priced in dollars) Brazil’s government bonds yield just under 3.6%. Investors like Brazil’s local government debt better because they get the high yield on investment grade credit coupled with a stable to strong currency that can add to the bonds capital gains.
January 31, 2012
Karen Eeuwens – Businessweek, 01/31/2012
Brazil’s central bank is likely to resume its dollar purchases and the Finance Ministry may introduce new foreign exchange policies after the real strengthened to less than 1.75 reais per dollar, UBS AG analysts Andre Carvalho and Eamon Aghdasi wrote in a report dated yesterday.
Such measures may cause the real to depreciate for a short period, before rising to 1.60 reais per dollar by the end of 2013, they said.
Brazilian policymakers’ high sensitivity to appreciation of the currency, low worries about inflation and increasing focus on economic growth suggest the announcement of such measures may be “fairly imminent”, according to the analysts.