The Real Falls Against Strengthening Dollar

By Anna Fitzpatrick, Contributing Reporter

SÃO PAULO, BRAZIL – The volatility of global markets stands to have ramifications the world over, and despite the recent boom in Brazil, many speculate effects will soon be felt close to home. The dollar has made a steady rise against the real during the month of September, a change that is not entirely unexpected in the current climate. Whilst economic growth is still forecasted for the coming year, inflation is seen as a problem even with major tourist events on the horizon.

The five year exchange rate of the Brazilian real to the U.S. dollar, Brazil News

The five year exchange rate of the Brazilian real to the U.S. dollar, image by Yahoo Finance.

As the exports sector is so important to the national GDP, the fall in value of the real will help Brazilian commodities become more competitive, but there are also fears that the increasing price of imports could release a further inflationary pressure on the economy – a pinch that will be felt by both expatriates and Brazilians.

Brazil has a reputation as an expensive place to visit and to do business, something that business development consultant Paul Camarao from The J&P Emerging Enterprises acknowledges.

“In the past years the weakening of the dollar and strength of the real has made doing business in Brazil for expats harder. Expats doing business in Brazil have not only been affected by the exchange rate, but also the overall increase in rent, food, and transportation,” Camarao told The Rio Times.

On the other hand, Camarao explains that the falling price of the real will make “investing in Brazil, whether it be starting new operations or expanding current ones, more attractive to foreigners and expats, as assets and operating expenses have become roughly seventeen percent cheaper than last month.”

President Rousseff highlighted that it was not only the real that had suffered devaluation in relation to the dollar. “There was a change in the U.S. dollar against other currencies, where the dollar had been depreciating – it is a movement of instability in the international markets,” she said in the U.S last week.

An investment in the future at Aratinga Inn on Ilha Grande, Rio de Janeiro, Brazil, News

An investment in the future at Aratinga Inn on Ilha Grande, photo by Aratinga Inn.

The surprise move by COPOM (the Monetary Policy Committee) to cut the SELIC rate has also contributed to the falling value of the real – though this will do little to curb inflation and won’t help with Brazil’s reputation as an expensive place.

Rennie Anthea Jackson, the owner of Aratinga Inn, a pousada in Ilha Grande, can see the benefits for the tourism industry of a strengthened dollar, especially if Brazil’s reputation as an expensive place can be challenged.

“Brazil is seen by foreigners as an expensive country in which to travel when compared with other countries in Latin America. Many of our guests express their shock (and dismay) at the cost of goods and services in Brazil. The strengthening of the dollar and a more favorable exchange rate for visitors from North America will help reduce the perception of Brazil as being an expensive destination,” Jackson says.

With the 2014 World Cup and the 2016 Olympics on the horizon, the impact of a weaker real on the tourism and development could be seen as a boost.

Jackson adds “I strongly believe that Brazil will continue to be an increasing tourist ‘Hot Spot,’ especially with the two major international events drawing closer. Here at Aratinga Inn we are demonstrating that confidence by investing further in the future of tourism – we are building two lovely, spacious new chalets which will be ready next month.”

3 Responses to "The Real Falls Against Strengthening Dollar"

  1. rio de janeiro apartments  September 27, 2011 at 10:49 PM

    A weak real definitely helps. We’ve already noticed an uptick in vacation reservations from the US as many want to take advantage of their higher buying power. This is definitely a positive for the real-estate industry. But it seems as if the government will intervene whenever the dollar closes in on R$2.00 as they want to try an keep it between R$1.70 and R$1.90.

  2. nicholas  September 30, 2011 at 10:49 PM

    “Brazil is seen by foreigners as an expensive country in which to travel when compared with other countries in Latin America.”

    Foreigners, mostly from the US, are hooked to cheap products from China. That is one of the main reason big corporations outsourced their jobs and made the people believe that the US does not need manufacturing jobs, but have a job in the service sector, go deep in debt (first 0% interest and then, boom, higher and higher, cheap money, you get the picture and know now what cheap does to you at the end), and continue to shop till they drop.

    Well guess what, it all has come to an end.

    Why is Brazil expensive?
    They do need a tax reform.
    they should not copy the US with it’s cheap shopping policy. It doesn’t work. Labor is expensive, but the same people shop in the country, so the money roles. Import is good, but forcing big business to invest in your country is better (read wealth of nations). read that book and you understand why nations have or should have tarifs. they do not want to become a slave nation that is hooked to cheap stuff.

    look at the US what happened with that bogus free trade.
    in the good days, people were smiling, screaming hard how great cheap clotes were (made in china) and now? they can’t even afford it, because the jobs are GONE.

    Cheap labor, to low prices and you see the result. easy gain, easy pain.
    Cheap money, is fast growth, big bust.

  3. vince crouch  May 10, 2012 at 9:59 AM

    Perhaps Brazil is expensive, but it is a country which abounds in natural resources and natural beauty not to mention the climate. In any market manpower is essential, unfortunately here in Brazil a large percentage of the manpower required are not interested in earning a living, they are only interested getting the price of their next “Pinga”. There is so much arable land with 4 harvesting systems per year,with perhaps a co,operative attitude it would be possible for people to reap the benefit and at the least establish a small market garden. Any population however poverty stricken benefits from “giving a neighbour a helping hand” without financial award. Now thankfully education has become more widespread here in Brazil and also imported TV shows enabling the inhabitants of the remote areas not to be so colloquial. With luck perhaps in 20 years Brazil will become a major world player.

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