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Weak Dollar Brings Brazil to the Rescue of Industry

The commercial dollar recovered a little ground today in Brazil after the Brazilian currency, the real, set a record high, this Wednesday, May 16, closing at 1,957 per US dollar. The real hadn't been that strong since January 16, 2001. It was the fourth consecutive day that the dollar dropped.

This despite the action of the central bank, which intervened twice to cool the real's heat. Today, in less of 30 minutes of activities the real had fallen to 1.935 for purchase and 1.950 for sale.
 
Stocks, which also hit record highs yesterday – Bovespa, the São Paulo's stock exchange ended the Wednesday up 2.41% and a record 51,737 points – were in retreat today.

Both the real and the stock market benefited from Standard & Poor's announcement that it had upgraded Brazil's credit score from BB to BB+ just one notch below investment grade. Fitch had already done the same last week.

Government to Help

The Brazilian government announced that is going to develop an emergency industrial policy for five sectors directly affected by the depreciation of the dollar against the Brazilian real. This depreciation harms Brazilian exporters.

The sectors to be helped will be the textile, shoe, furniture, naval and automotive. They should receive reductions of taxes on the payroll and financing with fast payment by the Brazilian Development Bank (BNDES).

According to the minister of Development, Industry and Foreign Trade, Miguel Jorge, the government is also studying the possibility of increasing the Import Tax on some products to make competition with Brazilian products harder.

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