Report
The Brazilian real: A good indicator of investor perception and the bubble logic
The Brazilian economy has been in trouble since 2011: weak or negative growth, external deficit, deindustrialisation, fiscal deficit, etc. It would therefore be normal for capital flows to flow out of Brazil permanently, and for the Brazilian real exchange rate to depreciate continuously. When we see capital flows to Brazil and an appreciation of the real exchange rate (2014-2016, 2017, late 2018 and late 2019, since the end of May 2020) , there is therefore an anomaly, resulting from the combination of a return to low risk aversion and excess liquidity provided by central banks. Periods of investment in Brazil and an appreciating real are therefore typical periods of bubbles linked to a very expansionary monetary policy.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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