A further weakening of Brazil’s real would be healthy for Latin America’s largest economy, said Luciano Coutinho, the president of development bank BNDES.
A depreciation to 2.45 per U.S. dollar, as forecast by analysts polled by Bloomberg, would make industry more competitive and help the current account deficit return to 2 percent of gross domestic product from 3.7 percent in the year through November, Coutinho said at an event in Madrid today.
Following the second-largest depreciation of 16 major currencies tracked by Bloomberg in the final quarter of 2013, the real this year has appreciated and outperformed all others except the New Zealand dollar and Japanese yen. Brazil’s central bank extended by six months into June this year a program of selling foreign-exchange swaps to bolster the real.
“The markets project an exchange rate with more depreciation, which is healthy for Brazil,” Coutinho said.
The real has strengthened 0.1 percent since the start of the year following a 13 percent depreciation in 2013. Analysts polled Jan. 17 by the central bank forecast the real, which weakened 0.7 percent to 2.3606 per dollar today, will depreciate to 2.45 at year-end and to 2.5 in 2015.
“Every once in awhile when we see the real outperforming peers, someone from some sector of the government speaks out,” Marcelo Assalin, who oversees $3 billion of emerging-market debt for ING Groep NV, said by phone. Some officials “still think all the problems surrounding the Brazilian industrial sector is because of the strong currency. It’s very misguided.”
A weaker currency increases the price of some imports and according to Coutinho would make managing inflation more difficult. Annual inflation last year accelerated to 5.91 percent from 5.84 percent in 2012, exceeding the official target of 4.5 percent for the fourth straight year.
Policy makers have raised the benchmark Selic rate for seven consecutive meetings to 10.5 percent in a bid to slow consumer price increases. Rates on swap contracts due January 2015, the most traded in Sao Paulo today, rose 0.06 percentage point to 11.07 percent.
“Brazil has a central bank with autonomy, the technical capacity and the conditions to keep inflation under control,” Coutinho said.