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. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Foreign Exchange

Latin America: Market round-up

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. If it dropped back to October 2002 levels today, it would have to fall twice as much: 54%. He notes drily: "We do not need to remind anyone who lived through the 2002 crisis that Brazil 40s were trading at 43 (versus 115 today) during that 27% real depreciation of  the exchange rate."

Meanwhile, the government has $141 billion in external and dollar-linked debt, against $60 billion in reserves; it has to pay almost $30 billion this year alone in external debt service to private and multilateral creditors.

The crisis of 2002 took place amid the political noise of a general election, and another is coming up in 2006.

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.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

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

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, 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

LOGIN NOW

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