The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Brazil: Avoiding the commodity curse

Is the Brazilian real overvalued? Is there a credit bubble? Is Brazil headed for a correction?

The view on Brazil’s near- and mid-term prospects will, to a large extent, be determined by the answer to the currency question. And there are many valuation theories: going by Brazil’s real effective exchange rate the currency is significantly overvalued compared with its 10-year average.

One banker talking to Euromoney repeatedly used the Big Mac Index to argue that the currency is about 40% overvalued. A Nomura Securities graph is more compelling. It shows the dollar-real inverted exchange rate compared with the CRB Metal Index. The strong correlation is evident and provokes two thoughts. First, if the real’s valuation is linked to the CRB Metal Index – and as the world’s largest iron ore exporter the relationship makes sense – then the real is close to fair value, and therefore concerns about corrections are eased. The second thought feeds into growing doubts about Brazil’s commodity-driven boom: is the country in danger of (another) bout of Dutch disease?

A recent World Bank report Natural Resources in Latin America and the Caribbean: Beyond Booms and Busts? addresses these growing concerns about the region’s increasingly commodity-reliant growth.

The demand is coming from China. The speed of the growth of volumes and concentration of Brazilian exports is stark.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree