The price of the Brazilian real continues to weaken against the dollar, exceeding 6.20 reais per dollar for the first time on Tuesday, in the face of persistent investor concerns about the Lula government’s budgetary policy.
(AFP / MAURO PIMENTEL)
At 12:19 p.m. (3:19 p.m. GMT), the American currency was worth 6.208 reais to the dollar, according to the daily Folha de S. Paulo.
The dollar was quoted at 6.05 reais at close on Monday, after reaching 6.09 reais during the day, according to the website of the Brazilian Central Bank.
The symbolic threshold of six reais to the dollar was crossed for the first time at the end of November, after the announcement of tax and budgetary measures received with suspicion by the business community.
This plan provides for a reduction in public spending of 70 billion reais (around 11 billion euros) by 2026, but also an increase in the income tax exemption ceiling.
This reduction in tax revenues is causing concern among investors, even if the government assures that it will be offset by an increase in taxes on the wealthiest.
“No one in this country has more responsibility than me on the budgetary level,” assured left-wing President Luiz Inacio Lula da Silva on Sunday during an interview with the TV Globo channel.
“The only thing that is wrong in this country is that the key rate is above 12%,” added Lula, for whom inflation is “totally controlled”.
The central bank raised its main interest rate by one point last week, to 12.25%, one of the highest levels in the world, due to inflationary surges in recent months.
Year-on-year inflation accelerated to 4.87% in Brazil in November, above the upper limit of the range — between 1.5% and 4.5% — targeted by the central bank and the government.
Since his return to power in January 2023, Lula has criticized the central bank’s monetary policy, saying that high rates hinder growth by making credit more expensive for consumers and businesses wishing to invest.
Latin America’s largest economy grew by 0.9% in the third quarter and is expected to end the year with growth of more than 3% in its gross domestic product (GDP).
Unemployment also reached its lowest level since 2012, at 6.2% over the period from August to November.
