Brazilian Real

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Forcast analysis of the Brazilian Real

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  • PPP if considering the relative cost of living and the inflation rates of the countries
  • largest exporting coffee, sugar, cattle, orange juice
  • they changed the currency name because the inflation rate was so high crisis -> safe currency -> dollar appreciation -> real appreciation -> hurt export
  • Brazilian Real

    1. 1. Brazilian Real Mai Kato Benjamin Carrion Schafer
    2. 2. Brazil Overview <ul><li>5 th largest area (8.5M km 2 = 5.7% of world total) </li></ul><ul><li>5 th largest population (191M = 2.83% of world total) Oct 9, 2009 </li></ul><ul><li>10 th largest GDP ($1.6T), 68 th per capita ($7,350) 2008 </li></ul><ul><ul><li>PPP GDP, 9 th for total, 80 th for per capita </li></ul></ul>GDP(PPP) per capita
    3. 3. Brazil’s Economy <ul><li>Agriculture, Mining & Manufacturing industries have led Brazil 10 th largest economy </li></ul><ul><li>Largest exporter of Coffee, Sugar, Cattle, Orange Juice, and Biofuel </li></ul><ul><li>Export 197.9B USD in 2007 </li></ul>Source: The World Bank
    4. 4. Currency History <ul><li>sf </li></ul>Source: Banco Central do Brazil Asian crisis ↓ stock market crash ↓ high interest rate Russian crisis ↓ Investments taken out ↓ high interest rate to protect currency Real - US$ pegged appreciation hurt exports floating exchange
    5. 5. Real/USD Exchange Rate <ul><li>Between 1999-2003 depreciating due to political uncertainties </li></ul><ul><li>Since 2003 continuously appreciating vs. USD except last economic crisis  Real sell off in favor of “safe” currencies </li></ul>
    6. 6. Analysis: Future Perspective
    7. 7. Increase of Exports <ul><li>Largest coffee, sugar, cattle exporter </li></ul><ul><li>Exports in 2006 =$137B, where 37% agricultural </li></ul><ul><li>Only 1/5 of cultivable land used </li></ul>Source: Bank of Brazil
    8. 8. Commodity Prices <ul><li>Exports increased in 2007 by 5.3% in Volume, but price increase accounted 72% </li></ul><ul><ul><li> If prices decrease Real will be under pressure to become weaker </li></ul></ul>Source: International Monetary Fund
    9. 9. Carry Trade <ul><li>Interest differential reducing, but stable around 10% (interest rates between Brazil and other countries </li></ul><ul><li>Brazils Moody’s credit rating in 2008 = Baa+ (investment rate) </li></ul><ul><li>Higher in order to control inflation </li></ul>Source: Thomson-Reuters
    10. 10. Stock Market Growth <ul><li>Outperforming traditional Indices (even other BRIC country stock markets)  Attracting foreign investment </li></ul>Source: Thomson-Reuters
    11. 11. Oil Discovery <ul><li>2007: Tupi oil field with 12 billion barrels in 2007 found (about 1% of the world’s total) </li></ul><ul><li>2008: discovery might hold 33 billion barrels, third-largest field ever found.  Brazil becomes from 17 th to 8 th position in the global oil rankings </li></ul>
    12. 12. Inflation <ul><li>Inflation decreasing  unemployment decreasing  Interest rates go down  carry trade will decrease    </li></ul>Source: Thomson-Reuters
    13. 13. Conclusions <ul><li>We expect the Real to get stronger with regard to the USD </li></ul><ul><li>BUT the government will have to intervene to limit its strength to keep their exports competitive </li></ul>
    14. 14. <ul><li>Questions? </li></ul>… see you all in

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