Real vs Dollar and other currency issues

[Bubba Boy]

Real 1.88 today.

The last 3 days the dow jones has dropped about 6%, the brazil index has dropped about 12%. The real has also gone from 1.77 to 1.88.

This is my point about volatility. When the US gets hit, the world gets hit. When times are good Brazil can do well, when times get really tough Brazil gets absolutely hammered. 1:2 is probably not far away.

[JohnnyBraz]

Australian dollar v Brazilian real

[JohnnyBraz]

JohnnyBraz.. 5 years ago it was 1.93 BRL to 1 AUD...

I know that and also that it was 2. 2 at one stage around that time, but I would like to go back a bit further. Like when the real was first introduced. Thanks anyway.

[Trippleecks]

JohnnyBraz.. 5 years ago it was 1.93 BRL to 1 AUD...

[Ryjerrob]

Just checked the rates

$1 - R$1.84

Is $2 right around the corner?

ryjer

[Bubba Boy]

IMHO I don't feel there are going to be large swings in Brasil’s economy nor will it go bust. Let's revisit over the long term. I'm generally lurking but I'll chime in from time to time. Right now best be worrying about the US economy. Did you hear today’s quote "The worst is yet to come" - Allen Greenspan, Former Fed Chairman.

Yes the US economy and europe are headed for tough times. This is exactly the situation in the past which has hit Brazil due to its higher volatility. When times are bad who gets hit harder the richer or poorer countries? Yes when times are good Brazil has done well in the past (the boom), however because they don't reform their economy when world economic times get bad Brazil gets absolutely hammered (the bust). We are looking at negative world growth for probably the next year.

The Brazilian economy is poorly diversified and severely inefficient. The Brazilian government just 2 years ago surveyed the top 48 economies in the world according to efficiency. Brazil came in number 48! This from their own government.

Lets not forget Brazil was defaulting on its debt as little as 7 years ago. Inflation was 1000+% just a little before that. This is a pattern that has been repeated over and over this century. What has changed this time around to suggest Brazil will not repeat is mistakes? In my opinion the same errors are there IE massive private and public debt, and zero economic reforms.

Now, in your argument you don't suggest any reasons why this time in the economic cycle Brazil will not experience what it has in the past other than they produce ethanol and have discovered some oil. These 2 factors combined account for perhaps 2% of total GDP. Basically a drop in the bucket.

You just can't expect a serverely corrupt, severely inefficient economy to whether a world economic downturn. hasn't happened in the past, history always tends to repeat itself.

In a years time the US will have worked through its problems and will start growing again.

[JohnnyBraz]

Not that it matters so much but the dollar fetched close to 4 Reais in late 2002. See attached graph.

From 1994 to 1999 Brazil tried to keep the Real pegged to the dollar 1:1 then they let it float and it was great, every couple of months things became cheaper and cheaper.

I remember many GDp's were not converting their Dollars to Reais because they all thought that it would soon fetch 5 Reais. One girl I knew who was making a lot of money even told me she had a boy friend who knew all about finance and had the inside story, they were sure it would fetch 5 soon, LOL.

How do I go about finding how my currency (australian dollar) was against the real past 5 years ago?

[UniversalX]

I actually do not have a premise that the Real will be 4:1, the part I did not agree with was your assessment that Brazil would continue to be prosperous in the coming years. Unfortunately Brazil has a history of boom/bust. The have just had the boom, IMHO they are just setting up for the bust. They haven't bucked this trend in 50 years, hence can't see anything different this time round. Particularly in the fact that their government is carrying record debt, has increased by 500% over the last 5 years. Adding to this is record private debt, increased 1000% in 5 years.

The US stock markets look like closing down 3+% today, Brazil looks like it will close down 7%.

IMHO I don't feel there are going to be large swings in Brasil’s economy nor will it go bust. Let's revisit over the long term. I'm generally lurking but I'll chime in from time to time. Right now best be worrying about the US economy. Did you hear today’s quote "The worst is yet to come" - Allen Greenspan, Former Fed Chairman.

[Bubba Boy]

I appreciate you disagreement but your premise for a return to 4:1 is shaky at best. I did not say they were going to be wealthy (wealth does not equal wealthy) but ask your self when did I last see 4:1? In the 90’s. not in the 20xx. Historical data USD to BRL shows the exchange rate 04/09/03 to 09/15/08 (as far back I could get data for) a five year period the statistics:

Average (1987 days): 2.36331
High: 3.24800
Low: 1.55380
Current as of 9/15/08 opening 1.78830

The 3’s were in the 2Q 2003 then dropped and resurfaced again 2Q-3Q 2004 only ever since then the real has risen against the dollar.

Be honest with your self with the US financials and dollar so weak the Brasilian economy would have to collapse which is not going to happen. As far as Brasil managing resources I will bet that they will do a good job (i.e., ethanol usage vs countries using oil for autos) they are managing ethanol to the point they are not dependent on oil and are now a net exporter of ethanol. So when they do get the oil from the newly discovered reserves they will be a major exporter of oil. Watch as they start to increase spending on infrastructure projects which they desperately need which will create more jobs.

As you mentioned purchases based on credit or access to easy credit by consumers will shake out, Brasilians are new to this its not like they are use to it like the developed countries but it will not be such a strain on the economy as you think. Again credit card debt is on finished goods for consumer purchase not on commodities. Commodity prices figure in the price of goods prior to and up to sale. Once sold commodities have no impact on the consumer thus their income figures into payment of debt, delinquency or failure to pay off debt.

In addition to Brasil’s base emphasis on education and elevating as much of the population from below the poverty line and increased foreign investments will elevate Brasil’s economy in the long run. Thus the future exchange rate value will not rise above 2:1.

If you think 4:1 will return what is your timeframe for this occurrence and what factors do you feel will precipitate the occurrence?

Overall this is not at world economic analysis forum/thread so I will end my lengthy dissertation. Let get back to what we come to these forums for monger reports!

EDITOR'S NOTE: I would suggest that the author or another Forum Member consider posting a link to this report in the Reports of Distinction thread. Please Click Here for more information.

I actually do not have a premise that the Real will be 4:1, the part I did not agree with was your assessment that Brazil would continue to be prosperous in the coming years. Unfortunately Brazil has a history of boom/bust. The have just had the boom, IMHO they are just setting up for the bust. They haven't bucked this trend in 50 years, hence can't see anything different this time round. Particularly in the fact that their government is carrying record debt, has increased by 500% over the last 5 years. Adding to this is record private debt, increased 1000% in 5 years.

The US stock markets look like closing down 3+% today, Brazil looks like it will close down 7%.

[Rio Bob]

I appreciate you disagreement but your premise for a return to 4:1 is shaky at best. I did not say they were going to be wealthy (wealth does not equal wealthy) but ask your self when did I last see 4:1? In the 90’s. not in the 20xx. Historical data USD to BRL shows the exchange rate 04/09/03 to 09/15/08 (as far back I could get data for) a five year period the statistics:

Average (1987 days): 2.36331
High: 3.24800
Low: 1.55380
Current as of 9/15/08 opening 1.78830

.[/blue][/size]

Not that it matters so much but the dollar fetched close to 4 Reais in late 2002. See attached graph.

From 1994 to 1999 Brazil tried to keep the Real pegged to the dollar 1:1 then they let it float and it was great, every couple of months things became cheaper and cheaper.

I remember many GDp's were not converting their Dollars to Reais because they all thought that it would soon fetch 5 Reais. One girl I knew who was making a lot of money even told me she had a boy friend who knew all about finance and had the inside story, they were sure it would fetch 5 soon, LOL.

[Exec Talent]

For those in the game, keep a close eye on the Dollar/Real today.

As I expected, a little bit of a wild ride. Down as far as 1.77 before closing at 1.825

[Superion]

$1 = R$1.81

[Madd Love]

Sao Paulo’s Bovespa stock index down 34% off from its May 20th all-time high.
The Brazilian real has plunged 10% in the past 10-days to 1.77 its lowest level against the dollar since February.

[Bubba Boy]

Hit 1.77 yesturday.

It is falling but not as much as other currencies against the US. The Brazilian stockmarket did this as well, it held up better than most in the early part of the year. However when it started to go down, it more than made up for it by plummeting. Possibly the currency could follow this trend, that is hold up sort of ok, then crash. Has to be a better than average chance we will see 2+ in a few months.

[El Greco]

There had been an honor El Greco, and to reciprocate. Unfortunately, I am not there until closer to Christmas. If you're still there then, feel free to send a PM.
B

Hope to be there until mid February. See you then.