Brazil Sounds Alarm: If Dollar Keeps Falling We’re Ruined

US dollar Guido Mantega, the Minister of Economy of Brazil warned this Tuesday, August 5, that the sustained appreciation of the local currency, the real, against the US dollar has reached "a limit" and if the real continues to advance, "it could ruin our external accounts."

"If the Real keeps advancing on the US dollar, we're lost," said minister Mantega during a seminar on economic development sponsored by the Getúlio Vargas foundation in the city of Sao Paulo.

On Monday in Brazilian money markets the US dollar closed trading at 1.56 reais, which represented a 0.19% appreciation over last Friday. So far this year the Brazilian currency has advanced almost 10% against the US dollar.

"We expect the real to stop advancing. It must move towards a more stable and desirable level. We're on the limit and if it continues, our external accounts will be ruined," said Mantega.

Nevertheless he argued that the sustained appreciation of the real against the US dollar, pushed by several years of record exports "have helped to reduce inflationary pressures."

Last week, Brazilian President, Luiz Inácio Lula da Silva, announced a package of US$ 9 billion in subsidized financing, 7% annually, to help those manufacturing sectors which have suffered most because of the sustained depreciation of the American currency.

When Lula took office in January 2003 the US dollar was selling at 3.90 reais. Since then it has strengthened, particularly in the last four years, to the range of 1.60 reais.

Although there was some speculation when Lula first took office given his socialist and union leader background, he surprised most analysts with a most orthodox approach towards economics and particularly inflation which have been behind the performance of the Brazilian currency.



  • Show Comments (25)

  • Ivo Cerckel

    reference for two messages ago
    This is Belgium.

    Celebration at the acquittal of the murderers of a thalidomide monster.

    Friday, 7 June, 2002, 14:43 GMT 15:43 UK
    Thalidomide: 40 years on
    In 1962, a Belgian woman was found not guilty of murdering her thalidomide baby.
    There was much celebration in LiÀƒ¨ge when she and her co-accused – her mother, sister, husband and the family doctor – walked free. UNSNIP

    You leave your money in a Brazilian bank to be stolen?
    I donˢ۪t stay in Belgium to be killed and my murderers then to be acquitted.

  • Ivo Cerckel

    Banana republic
    Article I of the Constitution of the Peopleˢ۪s Republic of Belgium says that
    Belgium is a Federal State made up of communities and regions.

    How can a Federal State be a Kingdom?

  • Ivo Cerckel

    That prosthesis was of course a hook which is useful in the movies but harmful in real life.

    Persons suffering from genuine, post-traumatic anxiety are often unable adequately to recall information
    (James C. Hathaway, À¢€œThe Law of Refugee StatusÀ¢€Â, Butterworths, 1991 p. 72)

    Ten years ago, I realised that my significant adults found it very funny that all children were afraid of me with that hook.

    Sorry, due to my comaˢ۪s, I donˢ۪t remember much.

  • Ivo Cerckel

    Thalidomide Monster
    Because I have never been to Brazil, I am not allowed to quote the BBC about Brazil?

    If, as the Die Welt-article which I quoted says,
    what the BBC says is not true,
    this is all the more reason for you to take your money out of the Brazilian banks.

    Yes, I have been quite seriously molested as a child in Belgium.
    Everybody saw that and nobody did anything.
    Quite to the contrary my molesters,
    forcing prostheses on thalidomide monsters like myself,
    are considered heroes in Belgium.
    Yes, the two serious comaˢ۪s, the first at the age of eight, and orthopaedic problems as a result of these prostheses and comas, are some of the reasons why I fled Belgium.

    I survive in the Philippines.
    In Belgium, a criminal court in LiÀƒ¨ge, said that
    all thalidomide monsters had to be killed at birth.
    Maybe thatˢ۪s why my molesters are heroes.
    If I had stayed there, I would have been dead long ago,

    I recently read that there is now a third generation of thalidomide babies in Brazil.
    Do they manage to survive beyond the age of four?

    Maybe thatˢ۪s another reason to come to Brazil.

  • Ivo Cerckel

    the mood in this country is buoyant, says the BBC
    First reread
    Secret Help for Hank!
    written by Ivo Cerckel, 2008-08-05 23:39:30

    Then read this:

    23:13 GMT, Wednesday, 6 August 2008 00:13 UK
    Credit crunch: Around the world
    Not for the first time when it comes to economic indicators around the world, Brazil as a developing country is bucking the trend for a gloomy outlook.
    Here, the news is less about a credit crunch and more about unprecedented opportunities for people to buy their own home or to purchase consumer goods that were previously out of reach.
    International investment agencies and magazines have been quick to notice that Brazil has largely escaped the pain of the credit crunch, and have been pointing investors towards Latin America’s largest economy as a safe bet.
    It is “business as normal” in Brazil, as one headline screamed. Foreign investors have taken note and are flooding into the country.
    Newly-available mortgage finance has undoubtedly opened the housing market to younger home buyers who were previously excluded.
    “I wouldn’t have stood a chance to buy this flat five years ago,” says Renato Guidolin, a 30-year-old graphic designer, who is about to close a deal on a new apartment in Sao Paulo.
    “It is easier to get a mortgage. The economy is a lot more established, which I believe is making buying a lot easier – not only houses, but all sort of goods.”
    There is visible evidence in many parts of Sao Paulo of a booming housing market, with construction work on residential buildings continuing at a furious pace.
    Sales seem to be happening at much the same speed – it often appears most apartments are sold before the work is completed.
    TV is awash with advertisements for companies selling electronic goods offering long-term credit deals. Despite the final cost, many Brazilians are choosing to buy more expensive items which, for many in the past, would have been out of their reach.
    All this is happening against the background of a much more secure economic situation in a country that used to be troubled by crippling inflation.
    Brazil remains a country marked by great inequality, but the steadily-improving economy has moved many of its poorer citizens onto the lower rungs of the middle class.
    There is certainly concern about the impact of rising food prices and Brazil is becoming a more expensive country in which to live – but for the moment, the mood is buoyant.

  • Ivo Cerckel

    FT – The Short View: Emerging market carry trade
    The Short View: Emerging market carry trade

    By John Authers, Investment Editor

    Financial Times, August 6 2008 19:26 | Last updated: August 6 2008 19:26,s01=1.html

    El superpeso is back. For the first time since 2002, a dollar buys less than 10 Mexican pesos.

    The last time it was this strong, earning the superpeso nickname, it caused alarm for exporters, who thought it wildly overvalued. But once inflation in the two countries is taken into account, it is more overvalued now, even compared with an inflated 2002 base. Prices have risen more in Mexico. To maintain purchasing power parity, the dollar should have risen by 18.7 per cent since 2002.

    An overvalued Mexican peso has caused global crises in the past. But this is different, with no official peg, and Mexican policymakers actively trying to stop the overvaluation.

    Rather, the problem is that Mexican rates have hit 8 per cent, to fight inflation. That attracts À¢€œcarry tradersÀ¢€Â looking for currencies with a high yield À¢€“ a risky game if the currency suddenly depreciates.

    Other emerging markets, led by BRAZIL and Turkey, with base rates of 13 and 16.75 per cent respectively, have attracted carry traders for years.

    Since 2002 (when it was in crisis), Brazilˢ۪s real has gained 142 per cent against the dollar. To maintain purchasing parity, the move should have been in the opposite direction, with the dollar gaining 28 per cent.

    Turkeyˢ۪s lira, which unlike the real is not fortified by commodity exports, has gained 45.5 per cent against the dollar. To maintain parity, the dollar should have risen 53.7 per cent.

    The resilience of carry trades is all the stranger as the US dollar is strengthening, near a six-month high against a trade-weighted index. Australiaˢ۪s dollar, a big carry-trade destination, is also instructive. It has dropped 7 per cent against the US dollar in three weeks, as its central bank signals rates might come down from their current 7.25 per cent.

    Increasingly, the emerging market carry trade looks like one of the last unburst bubbles.

  • Ivo Cerckel

    If the dollar of the U S of A is still worth more than the paper it is printed on,
    it is because OPEC, the Organisation of Petroleum Exporting Countries, is still backing it.

    If this junkie idiot puts the argument upside down,

    this junkie idiot argues under the television programme,
    that oil prices are high because oil is still being priced in that worthless piece of paper

    and under the article this junkie idiot then argues that the sellers of oil are converting their petrodollars to gold

  • dnbaiacu

    The Fed Claims they won’t be lowering interests rates any more they fear increased inflation
    God I hope so 8)

  • Ivo Cerckel

    Secret Help for Hank!
    The German Die WeltÀ¢€“newspaper reported on Saturday that Secretary of the US of A Treasury, Henry M. Paulson, Jr., received secret help on Friday.
    Secret help from China and the European Central Bank who sold large amounts of gold on Friday in order to prevent the collapse of the US of A financial system.
    Does the US of A dollar.still matter?

    2. August 2008, 04:00 Uhr
    Von Erwin Grandinger
    Geheime Hilfen fÀƒ¼r Herrn P.
    China und EZB stÀƒ¼tzen Dollar durch Intervention und Goldverk?ufe. So soll der Zusammenbruch des US-Finanzsystems verhindert werden

  • Ivo Cerckel

    WHy wait for the robbers?
    Why wait and allow the government to confiscate your bank account?
    Close your bank account.
    Keep your gold coins at home or in a Swiss bank.
    (If, in the meantime, you need cash, sell some gold.)

    What matters to me is that the sheeple protect themselves against “their” guv’mint.

    No, I’ve never been in Brazil.
    I lived the first 38 years of my life in the People’s Republic of Belgium.
    Eight years ago, I fled to South-East Asia.

    What also matters to me is to know the reason why the sheeple cannot take those easy steps to protect themselves.
    The sheeple laugh at me when I tell them I took those steps.
    But then you come complaining that guv’mint attacks those who did not take these steps.
    Of course, guv’mint is to blame for that.
    But the sheeple are / will be to blame for not having taken the easy precautions.

  • Ivo Cerckel

    the intrinsic value of the US dollar
    Since 15 August 1971, when US of A president Richard Nixon broke the Bretton Woods system, the dollar has no more value.

    Whereas we know that the euro has severed the link to gold,
    (International Charlemagne Prize of Aachen for 2002,
    Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002 )

    we are told that the dollar’s so-called value is backed by gold,
    but there is no gold available in Fort Knox.

    Soon the dollar will not even be worth the paper it is printed on.

    JoÀƒ£o is afraid that our good buddy Mantega is preparing us psychologically for a hefty devaluation of Real after the elections.

    How could the Real possibly be devalued vis-a-vis a piece of green paper which will be reduced to its intrinsic value?

    Or will the real after devaluation not even be worth the paper it is written on?

  • João da Silva

    Ivo Cerckel
    [quote] the mood in this country is buoyant, says the BBC[/quote]

    Lemme recall what you wrote before:

    [quote]No, I’ve never been in Brazil.
    I lived the first 38 years of my life in the People’s Republic of Belgium.
    Eight years ago, I fled to South-East Asia. [/quote]

    a) You have never steeped into Brazil
    b) For the first 38 years of your life you lived in the PeopleÀ‚´s ” Republic” of Belgium.
    c) Eight years ago, you fled to South-East Asia.

    My questions:
    a) Did you flee to South-East Asia, because of child molesting in your “PeopleÀ‚´s Republic” ?
    b) What exactly do you do in South-East Asia and which country there gave you asylum (POLITICAL or LUNATIC) ?
    c)Do you really believe in what BBC says?

    My suggestion is that you come over to Brazil and check the reality on the ground-provided they let you into the country.

  • João da Silva

    Thanks for the reply and I am going to go over it again. I think that Joseph like me does not expect our Green Buck (Remember our 1 Real currency is also green ;-)) to get stronger any further. Never in the history of our Republic, our currency has been known to appreciate against US$ and other strong currencies at this rate.I don’t know if it is a sweet dream or a nightmare 😉

    Thanks once again

  • João da Silva

    [quote]The Fed Claims they won’t be lowering interests rates any more they fear increased inflation[/quote]

    Hi, I saw your message addressed to me in that thread “Where is BrazilÀ‚´s Obama”. I am well and thanks for asking. I think you are taking time off from that thread, while Lord Augustus is right in the midst of a battle! I know that he is going to get tired too and pull out.

    As for your latest comment of yours, I find it funny that Feds don’t want to lower the Interest rate, because they fear an increase in the inflation rate. On the contrary, our “Banco Central” wants to increase the SELIC, to keep the inflation rate down! Unfortunately our friend Ch.c is as usual right!! The prediction here is that by the end of the year, the SELIC rate may go up to 14.5% .

    I suggest that you go over what Ch.c said (while I do so) as you have your investment too here as does Joseph.


  • ch.c.

    If the USA are well known for being addicted to oil…..98 % of the countries on earth have been addicted to… HYPER INFLATION, BOTH ON A SECULAR BASIS !!!!!

    And time has proven that being addicted to inflation is far worse that being addicted to oil !
    Fact : 98 % of the idiots saying the US$ has no value, have not realized that their own currency has lost nearly ALL its value on a secular basis, since 1971 and even worse when taken from earlier, against the apparent no value the US$ they critize !!!!!

    And let me also laugh when European Union Presidents and policians or educated citizens criticize the US$ on a secular basis. Fact is that the UK, France, Spain, Italian…in fact ALL of their currencies ….except the German currency, has lost value against the US$….. since 1971 !!!!!!
    As I said there is less than 5 currencies ON EARTH that appreciated against the US$….since 1971 !!!!

    About the Euro currency :
    – The Euro has been strong not because of their countries members but because of the Germans ONLY !
    that also explains about that the Euro strength critics in ALL EU countries…..except in Germany.
    What few people know, simply because they are not in finances, but when you look at the interests rates shown updated when looking at CNBC you NEVER see the EURO ten years bonds price and yields but only the 10 years BUNDS rate. smile.
    Because every European Union countries borrow at what their country rating is….not the European Union rating !
    Meaning that France, Italy, Spain, etc…… each of them borrow at a different rate than Germany !
    The other exception is of course UK, which is a EU member, but having neither the EU Central Bank as reference nor the Euro currency !!!
    Therefore saying the European Union have no BIG BIG internal problems and disagreements ….is a fairy tale only. The exception being when negotiating with another trade bloc or large countries,,,such as the USA, Brazil, India. China and Russia or groups of countries such as the G20 etc etc !!!!!

    😀 😉 😀 😉 😀 😉 😀 😉 😀 😉

  • ch.c.

    To Joao, Koichi Hito…. and to a junkie mentionning the Brazilian (non) DIVERSIFICATION….foreign currencies !
    – is this not what I was telling time and again of how UNWISE your junkies in the governments, Treasury and Central Bank were by deciding to have around 65 % of your foreign currencies…….by buying DAILY…the weakest currency the US$ was ????
    😀 😉 😀 😉 😀 😉 😀 😉

    My readings ? Simple :
    – re-read my previous comments where I said the USA are now the world best….EMERGING country ?
    😀 😉
    They are going to have a multi years (2 to 4) BEAR MARKET RALLY…. IN THEIR SECULAR LONG TERM DOWN TREND !
    Funny because even Warren Buffet agrees that long term the Us$ can only go….DOWN !!!!

    – The Brl has topped against the US$, not necessarily against other currencies since nearly all will also go down against the US$ !
    That is called the …CROSS RATES !!!
    😀 😉 😀 😉

    – For your information, early in 2007, some clever currency strategists predicted the Brl will move to 1,54 – 1,57 US$.
    Here we are.

    – Amazingly, for the last 10 days or so, even the day of your last rate increase, the free market has increased the PRICE of your bonds, from mid term to long term. The January 2010 benchmark moved from over 15,50 to 14,50, and your longer term bonds prices also moved up sharply….not down.

    My conclusion :
    – you may have another ONE rate increase, at most, and that is it.
    – it is time again, for Brazilians, to buy longer term brazilians bonds that will increase in prices as rates will go down.
    – I said for Brazilians because this time it wont be for me. Simply due to the currency risk, not to the bonds price risks of going down.
    – If I am right this will be very positive long term for your government and ALL the society. Declining currency is positive for exports, and declining long term rates is positive not only for Brazilians investors but also for Brazilians entrepreneurs and companies borrowing money in Brl at a lower rate with medium term borrowings.

    To Koichi Hito :
    Doubtful the Euro will appreciate further after a nearly double from 0,82 Euro per US$, to 1,60…in 8 years or so !.

    and to the idiot Ivo :
    – saying the US$ has lost value since 1971 against SOME currencies is true, BUT NOT against ALL currencies. Could you find out, if you are educated in what you are talking about, how much the Brazilian Currency depreciated/appreciated against the US$ since….1971 ?
    You would need millions and millions (billion should not be far off) of 1971 Brazilian Currency to make ONE US$….TODAY !
    Nearly ALL Asians currencies depreciated a lot against the “apparent currency with no value” ghe US$ is !!!
    In 1980 the Thai Baht was at 6 to 1 US$, Today at 33 bahts, after having reached 54 or so.
    And as I said, nearly all currencies from the ACTUAL emerging countries LOST ALL their value, since 1971, against what you call the currency with no value !!!!! Junkies remain junkies, you proved it.
    You can also do similar currency depreciations from India, Malaysia, Philippines, ALL africans countries, and ALL South American

    Ohhhh dear junkie, I forgot to add that in South America, many countries repaid only part of their debts through BANKRUPTCIES
    …if you did not know.
    furthermore….the USA still have the world largest GOLD reserves, if you did not know.
    Yessssss….they have 8’000 TONS…..wether you like or not.
    Ohhhh and they also have 700 millions barrels of oil, in strategic reserve, that had its value ALSO….ZOOMED UP….from the price they paid !

    Junkies remain junkies…you proved it.

    Ohhh dear junkie, and Russia went Bankrupt in 1998…if you did not know.
    In the mid 1970s One Ruble was worth several US$, Today around 28 Rubles are necessary to make ONE US$ !

    Who are the currencies that appreciated against the US$ since 1971 ? You can count them in the fingers of ONE hand…AT MOST !
    Meaning NOT MANY……dear idiot..and how you proved it ! My country is certainly of of them. The US$ depreciated by 75 % since 1971. Better yet, with an overall MUCH LOWER interests rates than the US$ !!!!

    Did you NOT know that starting with a 1971 base and then taking the exchange rates from 2002 has….. NO COMPARISON BASIS ??

    It is rather funny and laughable to hear the people around the world how THEIR currency has been strong, when 98 % of these countries currencies have lost nearly ALL their value against the apparent weak US$….since 1971 !!!!

    Not over, contrary to the statement that Brazil has a well diversified foreign currencies reserves is also DEAD WONG !
    Stupid question : did you also, like millions of idiots, found your University Degree in…..a DETERGENT PACK ????

  • João da Silva

    maybe Im getting old
    May be not.

    [quote]As for me, I am buying dollars now and trading euros. The dollar will rise when Obama is President for many reasons too lengthy to discuss here and many financial houses across euro are already predicting at 10-15% appreciation in US dollar values too…[/quote]

    That is the reason why I would very much like to know the opinion of Ch.c and I am not kidding. I am also going to buy some US$. Is it the right time or is it going to go down further before the Municipal elections here and go up after that?

  • Joseph

    maybe Im getting old
    I have seen the dollar wax and wane many times over 30 years and this is nothing new. The stength of a currency is not when it is very valuable, but the ability to push it lower or higher at will. The Bush administration, it seems to me anyway, has toyed with the dollar pushing it lower by outdated ideas (lower dollar make American good more attractive boosting US economy – problem is though that US buys from China and doest make much of anything to sell abroad). I also suspect, but I may be just paranoid, that many in the oil industry have grabbed dollars on the cheap and are waiting for the dollar to rise next year for instant earnings….it would be clever……

    As for me, I am buying dollars now and trading euros. The dollar will rise when Obama is President for many reasons too lengthy to discuss here and many financial houses across euro are already predicting at 10-15% appreciation in US dollar values too…

  • Koichi Ito

    Buy Euro Now!
    Please buy Euro Now! Soon Euro will rise in value quickly. So buy Euro as well as coins issued by European Countries! Also buy old European Coins too!

  • Ivo Cerckel

    International reserves of the Banco Central do Brasil
    International reserves of the Banco Central do Brasil
    The official reserve assets and the whole international reserves template are disseminated, in US$ millions.
    Official reserves include the following assets: deposits, securities, GOLD, Special Drawing Rights (SDRs), other assets in foreign currency and reserve position in the IMF.


    Next questions ;

    How much gold is there (left)?
    We need the answer to that question to be able to answer Ric’s question as to whether the real is backed by gold.

    And how is that gold being valued?
    On a mark-to-market (MTM) basis or at fixed price?
    The US Treasury values gold at a fixed price of 44 dollar or so per ounce.
    The European Central Bank on an MTM-basis.

  • João da Silva

    [quote]Remember when the inflation was 100% per month, or about 10,000% per cent per year? [/quote]

    Oh yes. That was during SarneyÀ‚´s government.

  • Ric

    Remember when the inflation was 100% per month, or about 10,000% per cent per year?

  • João da Silva

    Ivo Cerckel
    [quote]JoÀƒ£o is afraid that our good buddy Mantega is preparing us psychologically for a hefty devaluation of Real after the elections. [/quote]

    Ivo, were you living in Brazil in 1990?

    [quote]How could the Real possibly be devalued vis-a-vis a piece of green paper which will be reduced to its intrinsic value? [/quote]

    Just remember that 1 Real Currency is also a faded green paper. Probably you have not seen it.

    It is all easy for you to direct the bloggers to all the links in the Internet to stimulate a debate about Euro, Dollar,Real, Gold, etc;. But, you will feel the pinch, only when the government confiscates your bank account like they did in 1990. Until then, keep caressing your navel (in case you still live in Brazil. If not, it hardly matters to you).

  • Ric

    Is the real backed by gold?

    For years it was cheaper to drill holes in Brazilian coins than to buy washers.

    You could buy heavy copper coins of considerable age in junkyards, by the kilo.

  • João da Silva

    [quote]”We expect the real to stop advancing. It must move towards a more stable and desirable level. We’re on the limit and if it continues, our external accounts will be ruined,” said Mantega.[/quote]

    Is your good “buddy” Mantega preparing us psychologically for a hefty devaluation of Real after the elections? I think so.

    What is your read?

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