Brazilian Real Slumps to Lowest Value Against US Dollar in 2019

By Lise Alves, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – After four days being closed due to the Carnival festivities, financial markets opened in Brazil on Wednesday afternoon a bit pessimistic. By the end of the day, the US currency had registered the highest value of the year against the Brazilian real, up by 2.47 percent at R$3.836/US$1 and the Brazilian bourse closed down by 0.41 percent at 94,217 points.

Pessimism over the prospect of a swift approval of the social security reform as sent by the new administration last month, affected the rally say economists. Last week, President Jair Bolsonaro admitted the possibility of revising some parts of the proposal, including reducing the minimum age for the retirement women from 62 to 60 years.

“The investor needs a quiet airstrip. As long as the Social Security reform does not advance, we will not see major changes and this will weigh on the dollar,” Reginaldo Galhardo, foreign exchange manager at Treviso Corretora told weekly newsmagazine, Veja.

Investors are also wary of the political turbulences that seem to have followed President Bolsonaro since he took office a little over two months ago. The latest scandal includes a posting by the President himself criticizing an obscene video posted on the Internet about a samba bloco during Carnival.

The problem, say critics, was that not only did the President post his criticism, but also the video, which was watched by over two million people. The negative response to the video was so overwhelming, even among allies that the Administration’s press office issued a statement late on Wednesday explaining that the President was not criticizing the overall Carnival festivities, rather just a few individuals.

The latest forecast, released on Friday, March 1st, of the financial market for the forex remains at R$3.70/US$1 for the end of this year and at R$3.75/US$1 for the end of 2020.