February 20, 2020 / 4:50 PM / a month ago

UPDATE 1-Brazil's Guedes says weak FX due to low interest rates 'absolutely natural'

(Adds detail, quotes)

By Lisandra Paraguassu and Gabriel Ponte

BRASILIA, Feb 20 (Reuters) - Brazil’s Economy Minister Paulo Guedes said on Thursday that a weaker domestic currency should come as no surprise, given that interest rates have fallen so much, and said he was confident that economic growth will exceed 2% this year and beyond.

Speaking at an event in Brasilia alongside President Jair Bolsonaro and central bank chief Roberto Campos Neto, Guedes stressed that the real’s exchange rate is a floating one, and also played down divisions between the government and congress.

The real extended its recent slide on Thursday to a new all-time low within sight of 4.40 per dollar, with traders citing the apparently relaxed attitude of Campos Neto and Guedes regarding its weakness as a key reason for the continued sell-off.

“Just as you have a long investment horizon when you do fiscal reforms, it is absolutely natural that interest rates go down and the (dollar’s) exchange rate goes up a bit,” Guedes said.

“It (the dollar) could be 3.80 (reais), it could be 4, it could be 4.20. The exchange rate is a floating one, that’s the central bank’s domain. But the level is unquestionably higher.”

Guedes said that the second year of the Bolsonaro administration will be marked by further progress on its economic reform agenda, which will help deliver 2% growth this year and beyond, even as global growth slows and Latin America struggles.

“We are recovering the country’s growth dynamics. We need not fear international turmoil. Of course, there are always effects, but Brazil has always had its own growth dynamics,” Guedes said.

“The world economy is in a synchronized slowdown, Latin America is stagnating, and Brazil is going to take off,” he said.

Guedes’s bullish tone was at odds with a growing band of economists who have cut their 2020 growth forecasts recently to around 2%, citing a clutch of soft domestic economic data and the likely fallout from the coronavirus outbreak in China.

Guedes also played down apparent rifts between lawmakers and the government over its reform agenda, notably administrative reform, which is aimed at unleashing a major overhaul of the public sector.

“Everyone is nervous. Sometimes congress thinks we are putting too much pressure on them, sometimes it is on our side,” Guedes said.

The government’s bill is “taking a while” because Bolsonaro is “making some changes” to the text, which is “absolutely normal,” Guedes said. ($1 = 4.3970 reais) (Reporting by Lisandra Paraguassu and Gabriel Ponte Writing by Jamie McGeever, Editing by Franklin Paul and Jonathan Oatis)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below