APRIL 2013 |
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imports fell, which meant that competition locally increased. But, more importantly, exports became more expensive and hence less competitive, which affected the Brazilian economy badly. As the economy stuttered, local politicians decided to weaken the Brazilian Real. This is easier done when trying to undermine a currency from a position of strength rather than from a position of weakness. As can be seen from the charts the Brazilian Real has, in the space of one year, returned back to 2009 levels for all three currencies. So where to now for the Brazilian
Real? The recovery in the western world is at best tentative and Brazil still has its growing affluent middle classes which will continue to buoy growth locally. Therefore it is difficult to see further significant weakening for the Brazilian Real against these three currencies in the short to medium term – and, longer term, as the Brazilian economy grows, we could see it start to strengthen again which would increase the value of any Brazilian investment. Another important point to be aware of when making an investment is the difficulty in transferring funds internationally both to and from Brazil. We take it for granted the ability to transfer funds quickly and with minimal bureaucracy. This isn’t the case in most emerging markets as they protect their foreign currency reserves from rapid depletion by the use of exchange control. This means that paperwork can be excessive and the need to dot all the i’s and cross all the t’s when transferring funds either way is important.
FX
BRAZILIAN REAL | 57
Steady again | After some strategic weaking by Brazil’s government, the Real’s future looks fairly secure GBP/BRL average daily exchange rate February 2013
3.2 3.15
3.1 3.05
3
3.95 2.9
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th February 2013
GBP BRL 12 months average exchange rate
3.5 3.4
The OPP currency reports are prepared by Smart Currency Exchange, independent currency brokers.
This series of reports can be downloaded from
www.opp-connect.com/infozone To contact Smart Currency Exchange:
Tel: +44 (0)207 898 0541 Email: Partners@
Smartcurrencyexchange.com
3.3 3.2 3.1 3
2.9 2.8 2.7 2.6 2.5
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