Brazilian real is 19% weaker than it should be and will likely remain so – FGV economist

Political risk has increased with the Covid CPI investigations, the government's alliance with the Centrão congressional bloc, and a tendency for increased spending prior to the 2022 elections.

RIO DE JANEIRO, BRAZIL - The Brazilian real (R$) is undervalued by about 19% when measured against fundamentals. By the end of the year, the currency could show another large negative divergence as fears about fiscal policy revive, says Emerson Marçal, coordinator of the Center for Applied Macroeconomics at the FGV School of Economics in São Paulo (FGV EESP).

The data from the latest study referred to the end of June and were made available after a lag of up to two months from primary sources. The calculation is made for the actual effective exchange rate. At the end . . .

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