Brazil: keep your eye on the ball
Christian Stracke, emerging-markets analyst at CreditSights in New York, doesn’t agree with the increasingly-held view that Brazil could make investment grade.
In his research note, entitled Brazil – pre-history of a currency crisis, Stracke notes that the Brazilian real is stronger now than it has been in more than 10 years, and that emerging-market currencies never, over the medium to long term, sustain such levels of overvaluation.
Stracke points out that in the harsh crisis of 2002 the Brazilian real fell 27% in trade-weighted, PPI-adjusted terms.
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