November 10, 2006

Brazil's agribusinesses keeping a close watch on currency

Brazilian agribusinesses are berating Brazil's government for its exchange rate policy, its lack of investment in the sector and its poor handling of the foot and mouth disease outbreaks. 

The fact that Brazilian president, Luiz In¨¢cio Lula da Silva, has been recently re-elected must have been galling to agribusinesses, particularly as he hinted that the conservative economic policy he espoused during his first term, notable for its very high interest rates, would continue.  

Brazil has been strongly impacted by the appreciation of the Brazilian real.

Continued high interest rates meant a sustained inflow of foreign currency into the country, meaning that the Brazilian real would be permanently overvalued thus decreasing the competitiveness of Brazilian agricultural exports.