Real weaking phenomenon continues with USD

Ms Lagarde is committing ‘a mistake’ and the government of President Dilma Rousseff has a very clear position on the matter and in “our case (intervening in the foreign exchange) is absolutely necessary and we shall continue to do so”, said Mantega in the framework of the IMF/World Bank spring meetings in Washington. President Rousseff has campaigned openly in international forums arguing that the emerging economies are faced with a “monetary tsunami” because of the artificial “cheapening” of the US dollar and other (formerly) ‘strong currencies’.

However IMF managing director Lagarde has repeatedly considered inappropriate to adopt “interventionist policies”.

“Brazil is one of the countries which most suffers from the appreciation in value of the Real (local currency), our industry has lost competitiveness partly because of the weakening of value from the countries of other countries”, argued Mantega.

Furthermore “we are proving with facts that making precise spaced interventions in the foreign exchange market, a strategy used by other countries, we can reduce the disadvantages to our industries”, added Mantega.

As a result of this government intervention policy in the foreign exchange market this week the US dollar in Brazil climbed for five days running reaching 1.88 Real, a measure openly supported by the Sao Paulo Federation of Industries, FIESP.

However FIESP director Roberto Gianetti da Fonseca said that the increase was insufficient and advocated a US dollar in the range of 2.2 Real to really boost the competitiveness of Brazilian manufacturing and industries, according to Sao Paulo reports.

The US dollar in Brazil has dropped as low as 1.51 Real, but given the difficulties for the domestic industry and the flood of ‘cheap’ imports the government of President Rousseff has established a ‘non written’ floor of 1.80 Real to the greenback.