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Brazil Trying to Prop Up the Falling Dollar

Bovespa in action Brazil's currency, the real, appreciation against the dollar  is a "cause for concern," but also reflect international investors' growing interest in the nation's assets, Finance Minister Guido Mantega said on Friday.

"The appreciation of the exchange rate results from investors' enthusiasm about Brazil because the country offers more stable, secure conditions," Mantega told reporters.

But he also admitted "the (currency) gains harm the productive sector, exporters and farming. In fact it is a cause for concern," he added.

The US dollar dropped to 2.02 Reais in Brazilian money markets on Friday, having lost 4% during the week.

Mantega's comments mirror those of Central Bank President Henrique Meirelles on Thursday warning against "excessive euphoria" in currency markets. The bank has bought dollars in the spot foreign exchange market every session since May 8 in a bid to soak up a flood of greenbacks to Brazil and ease the real appreciation.

The currency has gained 15% since the beginning of the year and surged more than 20% since reaching a three-month low in early March.

Asked how the government could limit gains in Brazil's currency, Mantega said the central bank was already buying dollars and increasing international reserves "which, by the way, is one of the reasons why we are solid."

Mantega anticipated Brazil's economy would grow between 3% and 4% in the fourth quarter of this year, recovering after a deep slump in the first months of the year.

The central bank has signaled it will continue to lower domestic interest rates, a step that is in "the right direction," he added.

"The conditions are there for the economy to grow after a tumble in the last quarter of last year," Mantega said. "The recovery is under way, with a slower rebound in the second half that will gain steam toward the end of the year."

Trade Surplus

The Brazilian trade surplus (exports minus imports) totaled US$ 698 million in the third week of May, and the accumulated result in the month so far is US$ 1.750 billion. The information was supplied by the Brazilian Ministry of Development, Industry and Foreign Trade.

Last week, exports totaled US$ 3.129 billion and imports, US$ 2.431 billion. In the month of May, up until now, exports amount to US$ 9.078 billion and imports, US$ 7.328 billion.

From January until the third week of May, exports have totaled US$ 52.577 billion and imports, US$ 44.105 billion, resulting in a surplus of US$ 8.472 billion. The figure is 26.1% higher than the one recorded during the same period of 2008 (US$ 6.717 billion).

Mercopress/Bzz

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