Floating Exchange Rate Is Here to Stay, Says Brazilian President

Real and dollar Nelson Barbosa, the executive secretary of Brazil’s Ministry of Finances, speaking at a seminar at the Getúlio Vargas School of Economics, declared that the Dilma Rousseff administration considers its floating exchange rate policy to be the best strategy for the country.

And she is not considering any changes at this time, even though some parts of the business community would like to talk about it.

Speaking at the Growth with Sustainability – New Development Policy in Brazil Seminar, Barbosa explained that the government’s economic team is aware of the need to avoid any imbalance that could harm Brazil’s economy.

And although he admitted that the real is very strong against the dollar, he pointed out that at R$ 1.80 losses of competitivity in the manufacturing sector had been curtailed.

The dollar x real exchange rate hit a historical high of over R$ 3.80 at the end of 2000 during the presidential election that took Luiz Inácio Lula da Silva to the Palácio do Planalto.

After that, the rate fell steadily (reaching R$ 1.59 in July 2008), but suddenly rose due to the 2008 international financial crisis when it peaked at R$ 2.38 in January 2009.

Since then, it has fallen constantly once again, reaching R$ 1.57 in July 2011, but then rising slowly to Barbosa’s R$1.80 at the moment,

The executive secretary was very blunt about the government’s position: “The government does not have an exchange rate target,” he declared.

As for the business sector, Barbosa suggested that as it deals with the exchange rate on a day to day basis it should do so by means of a combination of incentives for increased production and an eye on the dynamics of the international market.

“The government is concerned with volatility. There you have a factor that affects investments and yields,” said Barbosa.

In other remarks, the executive secretary said that it was expected that there would be less volatility as commodity prices stabilized and adjustments were made to the expanded tax on dollar inflows (IOF).This is the 6% tax that is now levied on money entering Brazil for less than 5 years.

Rousseff in India

President Dilma Rousseff arrived in India today, March 27, for the 4th BRICS summit (Brazil, Russia, India, China and South Africa).

Attending the summit, besides Dilma, are presidents Dmitri Medvedev of Russia, Hu Jintao of China and Jacob Zuma of South Africa, along with the host, Manmohan Singh, the prime minister of India.

Tomorrow, Dilma Rousseff will receive an honorary degree from the University of New Delhi and attend two dinners.

Five ministers of state are traveling with the president: Antonio Patriota, Foreign Relations; Aloizio Mercadante, Education; Marco Antonio Raupp, Science, Technology and Innovation; Fernando Pimentel, Development, Industry and Foreign Trade and Helena Chagas, head of the Secretariat of Social Communication.

The governor of Sergipe, Marcelo Déda, and 110 business leaders are also in India with president Dilma Rousseff.

The main meetings at the BRICS summit will begin on Wednesday, March 28. On the agenda are talks on the creation of a BRICS development bank as part of one of the main aims of the five nations: increased trade, growth and development through bilateral agreements and the use of local currencies.

International affairs are also on the agenda: peace and security around the world, with emphasis on Syria and Afghanistan.

Dilma is scheduled to return to Brazil on Saturday,  March 31.

ABr

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