Good news? Bad news? The Brazilian Currency

As many already know the Brazilian economy has been in a boom period for the last decade. Oil discoveries off the coast of Rio de Janeiro state, economic & social reforms under the Lula Administration, a stable, and increased foreign investment are just a few reasons for the economic boom. As a result, the middle class grown, real estate prices have increased, and unemployment has fallen to record lows. With more people working and wages going up, these factors bring new purchasing power to millions of ordinary Brazilians who in the past never had disposable income. Disposable income equals increased consumer spending and demand for premium goods and services. Basically the extra cash flow means Brazil’s economy is strong. As a result, the Brazilian Real has gained dramatically on the weakened US Dollar. Well this is good, right? Well yes and no, here is why.

Brazilians can travel to the US and buy American products at cheaper prices and this promotes the American economy and pushes for less strict border controls for Brazilian and Americans who wish to travel between each country. That’s the good part. The bad part is eventually as the Brazilian Real becomes closer to the dollar in value, it products become more expensive, which price themselves out of various markets, losing to competitors like China, Mexico, and India, where the currencies are weaker. Also it becomes more expensive for visitors to Brazil. Por exemplo, on my recent trip to Rio in February, the exchange rate had 1 US dollar equal to 1.71 Brazilian Reais. In August 2010 and February 2011 the rates where 1.75 and 1.66. This may sound like a few pennies, but when traveling on a budget it can make a big difference.The biggest expense for the traveler will be lodging, food, and transportation. If staying in Brazil (specifically Rio) for a week or more, travelers can save hundreds of dollars on their trip just based on fluctuations in the exchange rate.

A bit more of the good. In the three months since my trip the exchange rate of US Dollars to Brazilian Reais has gone from 1.71 to 1.96. It is projected that this trend will eventually see the rate being 2 to 1. Which will probably happen within the next 20 to 30 days by my guess. This may sound bad but actually this is good for the Brazilian Economy. Yes, foreign products will be more expensive for Brazilian citizens but this gives those citizens the incentive to buy Brazilian made products which boasts Brazilian manufacturing, promotes job growth, increases tax revenue, and keeps money in the country. Also a lower exchange rate makes Brazilian products cheaper for export. This will allow Brazilian companies to compete with Chinese, Indian, and Mexican manufacturers in the global market.

Another bad part is that interests rates have also fallen to all-time lows . Good for consumers, but bad for investors. Investors will see smaller returns on the investments and this could be risky considering that Brazil’s past history of financial instability. Also if foreign investors decide to be cautious and pull money out of Brazil, it could spell economic disaster. Massive cash flow out of the country means less capital for banks to use in lending/investing which will cause credit to become restricted. This means less or no loans for small businesses, construction projects, etc, etc. Sound familiar? Personally, I think that lower rates will be good for everyday Brazilians . Why? Because during this economy boom period, consumer credit has been given out like free water. People are buying many goods on credit, but if a economic crisis were to befall Brazil, we could see another scenario like what has played out in the US and Europe. I think the reduction in interest rates and more expensive foreign products will hopefully make Brazilians save cautiously instead of SPEND SPEND SPEND and not get caught up in the current 1st World mess. On the other hand, lower interests usually promote more spending but Brazilians love their Apples, Levis, Sonys, etc just as much we do. So, we shall see. Brasilieiros….Do the Right Thing as Spike would say.

UPDATE: I was way off with why my predication of when the exchange rate would react 2 to 1. It  actually reached this mark a few days after I starting writing this. So now go to Brazil and spend, spend, spend

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Interview with Mariana

Coming with another interview with one of my favorite Brazilians. Introducing Mariana!! Hope you enjoy!!

 

 

 

Where did you grow up in Brazil?

– I grew up in the Wonderful City – Rio de Janeiro!!!

What is your profession?

– My profession… I want to be an Engineer, now I am a Master’s Student.

Which languages do you speak?

 I speak Portuguese, English, French (I’m still not able to write well in French) and some Spanish (Portonhol, like we say in Brazil!!) =D

How did you learn English?

– I studied a little bit, however, I improved my skills listening to music (such as Queen!!), watching movies and talking to people. I still have some problems with prepositions.

What is your cultural/ethnic background?

– Ethnic background… well, I’m Brazilian… just mix white, black and native Brazilians and you will get “something” very similar to me!! :p

Favorite place in Brazil?

– Now that I’m far, my favorite place is my mother’s house, and Parque Lage.

Site where Snoop Dogg filmed his video for “Beautiful”

What is you favorite time of year in Brazil?

– I love summer! I was born during summer.

 

What is your best Carnival memory?

– I think the best memory, at least a recent one,  was when I started my Bachelor degree. Me and my new friends from my University had a lot of fun together.

How has Brazil changed over the years?

– Well, Brazil is a strong economy now. But internally we still have most of the same old issues.

Could you see yourself living anywhere else? (Outside your current
city or abroad)

– I live in France now.. But I still could imagine myself living somewhere else – not here. I am going to do an internship in Denmark, and so far the idea of living there pleases me very much.

 

How is it different living in France compared to Brazil?

– Food, weather, the speed of making friends…

 

What things do you miss about Brazil?

– Meat, weather, beach, friends, family

 

What are your plans after finishing your Master’s Degree in France?

– I want to start working!

 

How did we meet?

– I think I was watching a Rugby game in a bar (maybe close to Ipanema) with some friends, and you called me (we had talked before on CouchSurfing), and I left the bar to look for you.

How can you tell that a person is a gringo/gringa – minus language?

– Well… Usually you can tell that looking at the very white ones, that just arrived in Brazil.. after a while, I don’t know… maybe it’s possible to tell by their accent (but that’s excluded from the possible answer)

What is your biggest annoyance about visitors?

– The biggest annoyance of visitors is the false image they have about my country and my people. I hope when/if they spend enough time there, they are able to change their point of view. 😉

Favorite foreigners? (country)

– I don’t have favorite foreigners. As long as they are friendly and respective, I love everyone!

Advice to future visitors coming to Brazil?

– Leave some of the preconceptions at your country! And be safe.

 

 

Lost my wallet

I left for Brazil on Feb. 16th, 2011, flying from Raleigh to Charlotte, then Charlotte direct to Rio de Janeiro. My flight was about 10 hours and pretty uneventful. Basically, I ate my in-flight dinner, watched one of the movies, and then slept until we landed in Rio. After landing and going through customs, things got interesting rather quickly. The plan was go to the ATM, get some local currency (Reais), and hop on the very cheap Real Onibus to ride into the city.

 Well when I reached the ATM, I couldn’t find my wallet. Yes, I COULD NOT FIND MY WALLET!! Instant freak out mode. Foreign country, different language, and no cellular service. S***! OK OK Mike. Calm down. Re-trace your steps. Not in my bags, pockets empty. Last time I remember pulling it out was on the plane. S***! I LEFT MY WALLET ON THE PLANE!!! Mind you I have just spent the last 4 months learning basic Portuguese. ummmmm yea out window…..ENGLISH PLEASE!!

 Well this is an international airport……….somebody has to be able to speak English. My thoughts are racing and I’m sweating buckets because I am so nervous plus the temperature was in the 80s in Rio. I calm down somewhat. I walk back to the International Arrivals area looking for nearest help desk/tourist info desk. Luckily the girl working the desk could speak some English. First I get sent to the US Airways ticket desk but since US Airways only has 1 departing flight a day, which is at 11pm, the desk was closed until 5 pm.

The problem was that we landed around 9 am. Not Good. I head back to the help desk, explain the situation and the girl at the desk finds one of the guards who goes back into the terminal to see if he can find my wallet. He comes back with a US Airways rep and she asks for my ticket says she will go look for me. 15 to 20 anxious minutes…viola! I have my wallet in hand…………THANK GOD!!!