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Brazilian Real

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Forcast analysis of the Brazilian Real

Forcast analysis of the Brazilian Real

Published in: Business, Economy & Finance

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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
  • Transcript

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