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Little love lost between Mercosur partners

The tango effect is being felt in the international bond and currency markets and in the halls of the central bank in Brasilia, but so far it has had relatively little effect on the average Brazilian.

       
Cavallo and Malan

The tango effect is being felt in the international bond and currency markets and in the halls of the central bank in Brasilia, but so far it has had relatively little effect on the average Brazilian.


While Argentines switch their peso deposits to dollars and move their dollar deposits out of the country, Brazilians remain perfectly happy with their currency, the real. And since both personal savings and personal credit (including mortgages) are minuscule in Brazil, the central bank's rate increases have had very little direct effect on individuals' finances.


So far, the tango effect has had an effect on individual Brazilians generally only when they've travelled abroad, and found everything much more expensive than it was six months ago. Brazil, notwithstanding its stunning coastline, continues to run a tourism deficit: maybe the recent depreciation of the real will be the thing to finally bring the tourism account into surplus.



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