Brazil’s Currency Decline has a Silver Lining – Boosting Exports
According to Bloomberg News, at the end of May 2013, Guido Mantega, Brazil’s Finance Minister, said that he is not concerned about the real’s recent weakness and that the government won’t use the exchange rate to tame inflation. Mantega said a weaker real can boost exports.
The real has weakened more than 4 percent against the dollar in the past month, and extended its decline after Mantega’s comment. The real closed at R$2.146 to US$1.00. That is a nearly 10% drop from its close R$1.93 to US$1.00 close in May 2012. According to economists, the implied exchange rate based on purchase price parity is about R$2.60 to US$1.00, so there could be a further drop to reach this PPP level.
As noted by Mantega, the silver lining of the devaluation of the real is that it can have a dramatic impact on exports because Brazilian products will be cheaper. As noted in these pages, Brazil has a developed and integrated manufacturing sector, with the second biggest industrial sector in the Americas (behind only the USA). Brazil’s produces nearly everything including automobiles, petrochemicals, machinery, electronics, cement and construction, aircraft, textiles, food and beverages, mining and consumer durables.
Many of these suppliers are small and medium enterprises (SMEs) who have the capacity but not the means to export, until now. The internet has created a channel for SMEs to be found particularly through B2B trade portals. An indispensable online source for finding Brazilian exporters and doing business in Brazil is B2Brazil. B2Brazil.com is a Brazilian-based online directory of Brazilian companies for business-to-business transactions, and its focus is Brazilian SMEs. With Brazilian goods getting cheaper, the opportunities for both buyers and sellers on B2Brazil.com are only getting better.
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