In a revival of the phrase of Lorenzo Sigaut, the Minister of Economy of the Argentine dictatorship who in 1981 said that “the “He who bets on the dollar loses,” Brazilian President Lula da Silva has lashed out at those speculating on the direction of the real.
Lula da Silva said on Thursday that those who bet against the country’s currency will lose money, after the real weakened and reached its lowest level in more than two years.
“Those who bet on derivatives, on the strength of the dollar against the real, will lose money,” Lula said, according to Reuters.
The real was quoted on May 3 at 5.07 against the dollar and this Thursday it closed at 5.50. This happens while The interest rate remains at 10.5% per year, against inflation of around 3.5%.
The high rates led to strong criticism from Lula against the president of the Central Bank of Brazil, Roberto Campos Neto, which added more noise to the Brazilian market, in a country that has historically been characterized by the independence of the monetary authority.
Lula described Campos Neto as “political and ideological adversary.” The mandate of the president of the Central Bank ends at the end of the year and Lula said that when his successor is named “Things will go back to normal.”
The devaluation of the real thus becomes bad news for Argentina. Claudio Caprarulo, from the consulting firm Analytica, said that “Inflation and activity levels in Brazil are higher than expected. “This led its Central Bank not to lower the interest rate and increase the depreciation of the real, the latter also influenced by monetary policy in the US.”
“In Argentina, these conditions have two opposing effects, considering that Brazil is one of our main export destinations. A better level of activity boosts our sales, while this is at least partially offset by the devaluation of the real. Since December, our exchange rate competitiveness with Brazil has fallen by 50%. Thus, the decision of the Central Bank of Brazil “further limits the 2% monthly crawl that our monetary authority decided on,” Caprarulo said.
The crawling peg is the rate of devaluation of the Argentine peso, which Minister Luis Caputo has been maintaining at 2% per month after the exchange rate jump last December, despite the fact that inflation is growing at a stronger rate and has already accumulated close to 90%. in the year.
Pablo Repetto, from Aurum Valores, indicated that the combination of fiscal and monetary issues are behind this correction of the dollar against the real.It hits us from several sides. The real exchange rate is appreciating even more and this is creating a problem for the current account in the balance of payments. An increase in the dollar against the real in Brazil generates more imports and fewer exports.”
And he warned that “if we reach the summer with the real at this level and maintaining the crawling peg of 2% monthly, plus the elimination of the Country Tax that ends at the end of the year, The tourism balance is going to be tremendously deficient for Argentina“.
“In Argentina, the multilateral real exchange rate against the 12 main trading partners has fallen by 45% since December. A strong dollar in the world and a strong real are bad news that put more pressure on the appreciation of the Argentine peso“said Elisabet Bacigalupo, from Abeceb.
“In a context where net reserves remain practically non-existent, this adds pressure in a context where the exchange rate strategy is in the spotlight,” said Bacigalupo.
