Brazil’s new FX low is not the financial record to watch
Brazil’s currency hit an all-time low nominal value on November 18, closing trading at R$4.20 to the dollar.
The news flashed across social media and was picked up by national TV news and the newspapers. It caused much hand-wringing and anxiety – not least as these stories were often accompanied by photographs of supporters of the impeachment of Dilma Rousseff holding signs in 2016 saying: “I want my R$1.99 to the dollar back” – the implication being that the political upheaval caused by these protests had backfired.
In Brazil, the exchange rate matters. The Brazilian middle classes quickly grew accustomed to the heady valuations of 2012 to 2015 (peaking at R$1.53) that enabled them to travel to the US to visit Mickey Mouse’s kingdom and snap up boxes of iPhones in the Miami South Beach Apple store.
Now Twitter and Facebook are awash with expressions of economic anxiety – and the cancellation of foreign travel.
Latin Americans are keenly aware of their currency valuations – a historical hangover from many countries’ bouts of high inflation and currency collapses (sadly Argentina is again living through this). Falling to lows such as this touches a nerve in the national psyche.
Bankers trying to contextualize this new FX record have been drowned out by the angst.