Analysis of the impact of the rising Dollar on the Brazilian economy
The recent appreciation of the dollar against the real has brought challenges and opportunities to different sectors of the Brazilian economy. This phenomenon, exacerbated by expectations of higher interest rates in both the United States and Brazil, raises important questions about its implications for companies and the economy in general.
Understanding the causes of the increase in the Dollar
According to Bruno Monsanto, economist at RJ+Investimentos, the "super-depreciation of the real" can be attributed to multiple factors. The reduction in the interest rate differential between Brazil and abroad, combined with the perception of a worrying Brazilian fiscal situation, are central elements in this context. Furthermore, the significant outflow of foreign capital, which exceeded R$22 billion in the first quarter of 2024, has put pressure on the national currency.
Who benefits from the high Dollar?
Despite the challenges, some sectors benefit from the rise in the dollar due to the specific characteristics of their operations. Sectors such as mining, pulp and paper and proteins, represented by companies such as Vale, Suzano, Marfrig and Gerdau, tend to gain from the appreciation of the North American currency due to the increased competitiveness of their products in the international market and higher revenues when converted For the real.
Challenges for sectors sensitive to exchange rate variations
On the other hand, companies that depend on imports or that have debt denominated in dollars face greater difficulties. The aviation sector, for example, represented by companies such as Azul and Gol , is particularly vulnerable due to high jet fuel costs and the additional pressure from geopolitical tensions that could drive up oil prices.
Retail, especially electronic products such as Lojas Renner, also suffers from increased import costs, which can inhibit consumption due to subsequent inflationary pressure.
Long-term consequences
The continued rise of the dollar could have broader implications for the Brazilian economy, influencing everything from monetary policy to company investment decisions. The need for an effective hedge against exchange rate volatility becomes even more critical for companies with significant exposure to the dollar.
The rise in the dollar can have several direct and indirect consequences on the shares of companies listed on the Brazilian stock exchange, but whether it will be just a transition period or something more prolonged depends on a series of global and local economic factors. Here are some points to consider:
Immediate Impact on Shares
- Exporting Companies: Companies that generate a significant portion of their revenue in dollars generally benefit from a higher exchange rate, as their revenue in reais increases. This could lead to an increase in its share price.
- Importing Companies: On the contrary, companies that depend on imports may face higher costs, which can reduce their profit margins and, consequently, put downward pressure on their share prices.
- Debt in Dollars: Companies with significant debts in dollars will have a higher financial cost, negatively affecting their results and potentially the value of their shares.
Long-Term Considerations
- Inflation and Monetary Policy: A prolonged rise in the dollar can contribute to inflation, leading the Central Bank to increase interest rates. Higher interest rates can discourage investing in stocks, favoring safer, fixed-income investments.
- Investor Confidence: Exchange rate volatility can affect investor confidence, especially foreign investors, influencing the flow of capital into or out of the Brazilian stock market.
Transition or Trend?
Determining whether the current dollar rally is a temporary condition or a long-term trend depends on:
- US Federal Reserve (Fed) Policies: Interest rate decisions in the US have a significant impact on the dollar globally.
- Fiscal and Political Situation in Brazil: Fiscal and political stability in Brazil directly influences the perceived risk and, consequently, the exchange rate.
- Global Economic Scenario: Factors such as geopolitical conflicts, pandemics or global financial crises can affect the relative strength of the dollar.
The relationship between the rise of the dollar and stock performance is complex and varies depending on several factors. Investors and analysts must closely monitor economic and political developments both locally and internationally to make more accurate projections.
Concluding
The trajectory of the dollar will continue to be a critical factor for the Brazilian economy. While some companies may benefit, others may face substantial challenges. It is vital that both policymakers and business leaders consider these dynamics when making strategic decisions to mitigate adverse impacts and take advantage of emerging opportunities.
We would like to hear your opinion on this topic. How do you think the rise in the dollar will affect the Brazilian economy in the long term? Comment below!
