Brazilian Exporters Abandon Dollar in Favor of Euro

The euro is presenting itself as an alternative for Brazilian exporters when faced with the current devaluation of the United States dollar against the Brazilian real (R$).

Since the end of last year, when the Brazilian currency started becoming stronger against the dollar, the Brazilian federal government and some sector organizations have been suggesting that companies establish foreign trade prices in the European currency.


“Exporters can present their sales prices in euros or sell in dollars and make hedge contracts in euros so as to protect themselves,” stated the secretary general of the Arab Brazilian Chamber of Commerce (CCAB), Michel Alaby.


The foreign trade director of the Bank of Brazil (BB), José Maria Rabello, stated that the bank is even recommending the use of euros in international negotiations. “We have been making an effort for exporters to make contracts in euros,” he said.


The euro has shown itself a less volatile currency than the United States dollar in the long term. Last year, for example, the price of €1 started the year at R$ 3,63, on January 02, and ended the year at R$ 3.61, on December 31.


The oscillation was 0.51%. With regard to the dollar, the price dropped from R$ 2.88 at the beginning of last year to R$ 2.65 at the end of the year, an 8% drop. “If exporters had sold in euros, they would have lost just 0.51%, but as they sold in dollars, they lost 8%,” calculated Alaby.


Rabello stated that hedge contracts in euros are also an option for exporters, but he believes that the first alternative should be price lists using the European Union’s currency.


“Hedge contracts have a cost. If it is possible to sell in euros, that would be better,” he said.


The Bank of Brazil itself, however, offers contracts for protection to businessmen. In this case, exporters sell their products in dollars and make contracts in euros for the value of the export. Rabello recommends that each operation be evaluated individually so as to see if it will be profitable.


The Bank of Brazil is also offering exporters the possibility of organizing their export financing contracts, such as the Advance Against Exchange (ACC) and the Advance Against Draft Presentation (ACE), in euros.


On the Other Side


The exchange of the North American currency for the European currency is also going to depend on the importer. So as to sell to Europe, for example, there is no problem. On the other hand, when other markets are considered, it is also necessary to consider the rates of the domestic currency against the euro.


So as to make the importer happy, it is necessary that the euro not be rising against the country currency. “In general, our markets may work with the euro generating few losses,” stated Rabello.


According to Alaby, in the Arab countries the currencies are generally more stable when compared o to the dollar and the euro than the Brazilian currency.


In some Arab countries, there was devaluation with regard to the euro at the beginning of the year, making products priced in the European currency a more attractive purchase for importers.


In Saudi Arabia, for example, one euro was evaluated at 5.09 rials on January 02 this year, having dropped to 4.82 rials on February 04. The same occurred in the United Arab Emirates, where the euro dropped from 4.99 dirhams on January 02 to 4.72 dirhams on February 04.


With regard to last year, in the case of both Saudi Arabia and Algeria, the euro gained strength against the local currencies. In Brazil itself, in the short term, the euro has been losing value.


The European currency, which was evaluated at R$ 3.41 on the first working day of this month, dropped to R$ 3.33 yesterday. “The exporter must be aware of the foreign currency market so as to know how to negotiate,” stated Alaby.


Translated by Mark Ament
ANBA ”“ Brazil-Arab News Agency

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brazil Gets Record Sugarcane Harvest and Believes Sky Is the Limit

The strong foreign demand for sugar and ethanol has brought to Brazil a record ...

Brazil’s Falling Industrial Production Dampens Market

Latin American markets followed a similar pattern to yesterday, as Brazil and Mexico slumped, ...

For Lonely Planet Brazil Has Become Hot Tourist Spot

Brazil comes in fifth place among the most sought after destinations for international tourists ...

Oil and Science in Brazil-Tunisia Agenda

Tunisia and Brazil may establish scientific cooperation agreements in the areas of information technology, ...

Brazil Cuts Half New York in Amazon Trees in a Month, And It’s a Record Low

Brazil's Environment minister, Carlos Minc, is celebrating the pace of Brazilian deforestation. The last ...

Brazil’s Largest Companies Make the Forbes List

The last survey made by the Forbes magazine about the greatest companies in the ...

Brazilian Amazon’s Worst Drought in 40 Years Brings Rainforest to Brink of No-Return

The devastating drought currently affecting the Amazon rainforest is part of a vicious cycle ...

Brazil Industry Calls Government Pigheaded for Refusing to Cut Interest Rates

The president of Brazil’s Federation of Industries of the State of São Paulo (Fiesp), ...

Brazilian small farmer

Brazil’s Agrarian Reform: From 240,000 Lula “Settled,” Half Had Land Already

At the end of January, the Brazilian federal government announced that it had achieved ...

US Good News Gives Brazil Markets a 6% Boost

São Paulo, Brazil, is celebrating today its 454 birthday and for that reason Brazilian ...