Real stands out among emerging rivals with foreign appetite and opens debate on the low dollar of R$ 5

THE Brazilian real looms among peers emerging with the best performance, among the appetite of foreign investors per actions at brazilian scholarship. The entry of external resources here heats up the debate on the dollar come under R$ 5.00.

For economist Tony Volpon, former director of the central bank, if it weren’t for the fiscal uncertainties and surprises in the new government’s speech, the dollar would already be trading between R$ 4.60 and R$ 4.90. “This has prevented the real from benefiting from the dollar’s global decline,” he said in the twitter.

We have been suffering from fiscal uncertainties and surprises in the government’s discourse. This has prevented the real from benefiting from the dollar’s global decline.

Just to give an (imperfect) comparison, if we had followed the Chilean peso, the real would be at 4.60 and 4.90 if it were the Mexican peso pic.twitter.com/1MmQWXnkB4

—Tony Volpon (@TonyVolpon) January 25, 2023

That is, the Brazilian currency did not perform as well as its Latin rivals. Even so, the performance of the real stands out. A survey made through the terminal Bloomberg shows that since the beginning of the year until yesterday (25) the real has appreciated by 5.57%, ranking fourth in the period.

In the lead, appears the Colombian peso, with +6.91%, followed by the Chilean namesake (+6.06%). Third on the list is the Hungarian forint, up 6.37% over the same period. Check out the report, for information purposes:

Optimistic foreigner, local not

Be that as it may, it is the avid appetite of the gringos by Brazilian assets that gives rhythm to the Ibovespa and drops the dollar. Accumulated for the month – and therefore for the year – the external capital balance between actions listed on B3 (secondary market) is positive at just over BRL 8 billion until last Tuesday (24).

Meanwhile, the local investors (individuals and institutions) have withdrawn, together, more than R$ 7 billion from the stock market up to the same period. The difference is that while the locals remain pessimistic about the Brazilin the midst of caution with the political-Supervisorforeigners do not have a “political bias” in business nor are they emotional about actions.

Volpon explains, in another “thread” on Twitter, that the gringo’s optimism with Brazil is based on a relative vision in relation to other emerging countries. Therefore, it is not an “absolute metric of many locations”.

Excellent summary of the “gringo’s vision” about Brazil and the new government. Note that the optimism is based on a relative view (versus other emerging ones) and not the absolute metric of many locations. Note also that the gringos give a vote of confidence in @Haddad_Fernando… 1/n https://t.co/geR9Y4fcfl

—Tony Volpon (@TonyVolpon) January 26, 2023

In this “relative” analysis, Brazil does not have the worst history. “Quite the opposite. And that is what explains the recent flow to Brazil”, comments a director of the treasury of a foreign bank.

Dollar below R$ 5?

This entry of external resources is reflected in the dollarwhich closed yesterday at the lowest value in almost three months. Such performance opened the debate on the North American currency breaking the symbolic mark of R$ 5.00.

“There is no reason to expect the dollar to surpass this level”, evaluates the director mentioned above, who prefers not to be identified. For him, most – if not all – of the reason that explains the relief of the real can be explained by some flow in sight. “Which is nothing enough to destroy the strong convictions of the locals”, adds the professional.

In this sense, the former director of the Central Bank assesses that the tendency of the behavior of the real against the dollar will depend on the flow of news. “It is not by chance that we see the dollar ‘shooting [más] news and then fall slowly, back close to R$ 5”, adds Volpon.

In any case, when the local outflows cease and the resident investor puts aside the usual Latin ‘drama’, the Ibovespa it’s the dollar must have a great relief. “Foreign investors are more constructive in relation to Brazil and interested in seeking opportunities in emerging countries. And that is very interesting”, concludes the director of the foreign bank.