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Investing in Real can still be worthwhile even with high dollar, says Financial Times


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The recent figures of the Brazilian economy have left foreign investors discouraged. However, a text in the British newspaper Financial Times swims against the current and considers the current moment an opportunity for “more daring” investors.

The logic does not seem very clear in principle. After all, the dollar closed on Tuesday (11) quoted at R $ 4.326, the highest level since the creation of the real – on an already distant July 1, 1994.

The American currency has also accumulated an appreciation of 7.81% this year alone, further boosted by positive numbers regarding job creation in the United States economy. This type of data usually helps to drain dollars that are allocated in emerging markets, such as Brazil.

Real and Selic

However, the Financial Times text starts from the new reduction in the basic interest rate of the Brazilian economy to justify its optimistic bet. The Central Bank's Copom (Monetary Police Committee) reduced it to 4.25%, the lowest level in history.

Called the Selic rate, it is the main instrument of the Central Bank to keep official inflation under control.

According to the text in the British newspaper, the repeated cuts in the Selic made investments in fixed income unattractive. Thus, in search of better returns, Brazilians have taken risks in more volatile applications, such as the Stock Exchange itself.

An example cited is that at the end of 2019 the value of shares held by Brazilians on Bovespa exceeded that held by foreigners for the first time since the beginning of 2014.

"This was great news for companies, most of which have been out of credit for decades, unless they are big enough to borrow abroad or, until recently, have been fortunate enough to be chosen for taxpayer-subsidized loans," says the text.

Business opportunity

The article in the Financial Times continues, stating that this internal impulse caused companies to exchange their external debts for financing obtained within the country itself. This possibility, previously considered “unthinkable”, is seen as an opportunity for investors.

“In the past four years, Brazilian shares have almost tripled in value in the local currency. Cautious foreigners risk losing, ”says the text.

Another bet of the text published in the Financial Times is about the Tax Reform, which is seen as a priority to reduce the bureaucracy and boost the economy.

Although it is late, the proposal that simplifies the collection of taxes in the country is one of the priorities of the National Congress and the federal government for this year. It is a strong indication that, at least, there will be a great effort to make it happen.

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