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.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Brazil battens down the hatches

The central bank has begun to address the financial crisis but must take more action.

Brazil’s central bank has had a tough month. In the two weeks between October 8 and 20, it was forced to spend $3.2 billion in the spot FX market to prop a continually faltering real.

The currency has lost more than a third of its value since the beginning of August as Brazil got sucked into the global financial crisis. The slide in the value of the real went beyond anyone’s expectations causing several Brazilian corporates, especially exporters, to reveal more than $2 billion of losses after making bad currency bets. By late October the government was offering FX funding for exporters through the BNDES, Brazil’s development bank.

Agricultural and retail companies look likely to be hardest hit after their treasuries took large punts on the real, only to see moves this month that were beyond any worst-case scenario their models would have predicted. By the end of October the government announced it would be willing to provide an additional $50 billion in foreign exchange swaps if needed.

Other measures the central bank has announced to safeguard Brazil’s financial system include potentially recapitalizing banks and corporates by buying preferred shares and arming itself with greater liquidity by creating currency swap lines with other central banks.

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