Save soldier Real. This seems to be the green-gold priority, at a time when the Latin American lion is starting to feel more bruised and threatened by the herd. Brazil's central bank has announced it will allocate more than $50 billion to defend the currency, which is under attack in the markets as the Latin American giant's growth begins to falter.
After the peak reached at the end of July (2,2571 dollars), the Brazilian real lost 8 percent against the greenback (collapsing to 2,4541 dollars). Brasilia, together with Moscow, New Dehli and Ankara, is part of the club of emerging countries that have suffered distrust from the markets for a few days. Investors, who now want to benefit from the interest rate hike in the US, have decided to repatriate the huge sums staked on emerging economies, which now appear to show structural fragilities.
To defend its currency, the Banco central do Brasil will offer $500 million a day – Monday, Tuesday, Wednesday and Thursday – in the form of swaps. On Friday, the bank will hold an auction to sell (with a buyout) billion-dollar lines of credit. On the basis of the 3 billion dollars offered a week, the Bank will put 54 billion dollars on the table to defend the real, specifying that "if appropriate, it will resort to further moves".
The new course follows by a few hours the announcement that the estimated growth of the green-gold economy has been revised downwards (2,5 percent against 4 expected in 2013, 4 percent against 4,5 in 2014).
Brazil's central bank raised its interest rate for the third consecutive time in July to 8,5 percent. A move which, while on the one hand makes it possible to combat the rise in prices and capital flight, on the other hand slows down consumption and growth. Year-on-year inflation fell to 6,27 percent in July, remaining below the government's 6,5 percent ceiling.
