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Dollar, inflation and oil: the impacts of the conflict in Ukraine for Brazil


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Reports of a possible Russian invasion of Ukraine raise fears of negative effects not only in Europe and the United States, but also among other countries that maintain political and commercial partnerships with the two nations. Brazil is on that long list.

But the first major impact felt in the country was positive, with the fall in the dollar. The American currency recorded its fourth consecutive decline against the real on Tuesday (22/22) and closed at 1.09%, trading at R$5.0511.

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The movement, according to analysts, is a consequence not only of the increase in the Selic rate by the Central Bank, but also of the inflow of foreign capital into the country in times of high risk.

Despite economists’ expectations of a migration of assets to safer markets, Brazil has become attractive for its ability to become a possible substitute supplier for some of the agricultural goods produced in Russia and Ukraine.

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“The current conflict affects countries that are major producers of agricultural inputs, grains and minerals, commodities that can also be found in Brazil”, says Rachel de Sá, economist at Rico Investimentos.

But the indirect impacts on Brazil of a possible war are not just positive. According to experts consulted by BBC News Brasil, these effects may also affect the national economy in the form of an increase in inflation and high prices for oil and its derivatives.

The crisis could also impact Brazil’s ability to import fertilizers and agricultural inputs, which are currently at the top of the list of products imported from Russia, and harm the national agricultural sector.

Politically, Brazil will be affected by the position it takes in the discussions at the United Nations Security Council, where the country has occupied a non-permanent seat since the beginning of the year.

Rising inflation, driven not only by the crisis in Eastern Europe but also by other external and internal factors, could still influence the outcome of the presidential elections scheduled for October.

Dollar and financial market

The impact of the crisis in Ukraine on the financial market is the first to be felt directly in Brazil.

According to Rachel de Sá, geopolitical conflicts tend to increase uncertainty in the global economy and, consequently, lead to an increase in risk aversion. This means that many investors may prefer to migrate their assets to safer markets, such as the American, Japanese or Chinese, and abandon emerging markets, such as Brazil.

“Emerging countries, such as Brazil, tend to suffer more in scenarios of greater aversion to risk, with reflections on the exchange rate, the stock market and other assets”, says the economist.

Despite this, what is currently observed in Brazil is a large flow of foreign capital. According to Rachel, this happens primarily because of the high Selic rate, driven by the Central Bank to try to stop the price increase, which guarantees greater profit prospects for investors.

At the same time, as a major commodity producing market, Brazil is also attracting companies and investors looking for alternatives to Russia.

“Brazil produces many goods that can be immediate substitutes for goods produced in Russia and even Ukraine, especially in the agricultural area”, says the economist.

All this has led in recent days to a fall in the price of the dollar against the Brazilian real. Consequently, the American currency ended the day this Tuesday at the lowest value since July 1, 2021, when it closed at R$ 5.0448.


In addition to the impact on the financial market, economists interviewed by the report say that the main immediate effect of the escalation of tensions tends to be the rise in the prices of oil and its derivatives.

Russia is currently one of the largest oil producers in the world, with a production capacity of over 10 million barrels per day. The country is still the biggest supplier of natural gas in Europe, responsible for around 40% of the continent’s total supply.

In addition to the very possibility of a military confrontation, the imposition of sanctions against Russian banks, companies and businessmen could paralyze the production and export of commodities.

The United States on Tuesday announced sanctions against Russia. The measures affect two Russian financial institutions — the VEB and PSB banks, including 42 subsidiaries — and prevent the trading of new Russian public debt securities on the market.

Britain had earlier announced penalties against Russia’s five banks and three billionaires, and other Western powers threatened to take similar action in the coming days.

“An invasion must be responded to with more severe sanctions than those currently being applied. This has a direct impact on the rise in oil prices and, consequently, on the increase in fuel prices in Brazil,” said the economist and former minister. da Fazenda, Maílson da Nóbrega, to BBC News Brazil.

On Tuesday morning, after the announcement of Moscow’s decision to recognize the independence of the Ukrainian breakaway territories of Donetsk and Luhansk, the price of a barrel of Brent was already approaching US$ 100 (R$ 509).

“In Brazil, the increase in the price of a barrel of oil does not only mean paying more for gasoline, but also for oil derivatives such as ethanol and cooking gas”, says Rachel de Sá, head of economics at Rico.


The increase in the price of oil has a direct impact on world inflation and, consequently, on Brazilian inflation, which has been rising since last year.

“The rise in fuel prices in Brazil has an impact on inflation and makes it difficult for the Central Bank to drive prices towards inflation targets”, says Maílson da Nóbrega. For the economist, this may also require the adoption of higher interest rates for a longer period of time.

Rachel de Sá recalls that, in addition to oil and derivatives, Russia is also the hub for exploration and production of several other commodities, such as ores and grains.

The export of these goods is also likely to be hampered by sanctions, causing even more damage to already shaken global production chains. This could, at the same time, put pressure on prices due to limited supply and reinforce the wave of global inflation.

“We have already experienced a strong movement of global inflation for about a year, driven by a large trade stimulus from the beginning of the end of the pandemic. This movement is further strengthened by the uncertainties regarding the crisis in Ukraine and constant growth in barrel prices of oil,” says Rachel.

For the former Minister of Finance, the final effect of rising inflation is a reduction in the pace of growth of the Brazilian economy. “The economy will probably not grow this year and may even fall a little. And the picture could get even worse with the increase in oil prices and inflation”, he says.

All of this may also have a direct impact on the outcome of the presidential elections, scheduled for October.

“An environment of severe inflation can affect President Jair Bolsonaro’s campaign in a very negative way, because no matter the origin of inflation, here or anywhere, it is always imputed to the head of government”, says Maílson da Nóbrega.

Agribusiness and domestic market

Economists also point out that the imposition of sanctions against Russia can indirectly harm the national market, especially Brazilian agribusiness.

In 2021, Brazil was the sixth largest destination for Russian exports. Fertilizers and fertilizers dominated the list of imported products, corresponding to around 60% (US$ 3.5 billion) of the total US$ 5.6 billion.

Russia is still the most important source of fertilizers for Brazil, having been responsible, in 2021, for around 25% of the total volume imported. With economic lockdowns, purchasing these products will become considerably more difficult.

“With the sanctions or even the loss of Russian export capacity, fertilizers become more expensive and the profitability of Brazilian producers falls, affecting their ability to continue expanding supply in the coming years”, evaluates Maílson da Nóbrega.

According to Igor Lucena, economist and member of Chatham House – The Royal Institute of International Affairs, the internal market in general can also be reached, albeit in a very discreet way.

“All economic relations with Russia should decrease. The Russians account for only 0.6% of Brazilian exports, which is little, but in a complex scenario like the current one, Brazil cannot risk losing any kind of consumer market”, it says

Lucena also recalls that sanctions can also prevent Brazil from acting as a trading post for Russian ships and vessels in South America.

“As happened with Iranian vessels after the imposition of sanctions by the United States, Russian ships will no longer be able to stop to supply and buy supplies in Brazilian ports, under the risk of penalty”, he says.

Foreign policy

In political terms, Brazil assumes a secondary position in the dispute. Despite this, he has gained more prominence since taking a non-permanent seat on the United Nations Security Council in early January.

“The Brazilian tradition in cases like this has always been to maintain a ‘neutral’ position, so at first we would imagine that Brazil would not take a clear position despite the fact that Russian actions obviously represent a violation of international law and Ukraine’s sovereignty”, he says. the professor of International Relations at Fundação Getulio Vargas (FGV), Oliver Stuenkel. “However, as a member of the Security Council, the country cannot be left off the radar.”

According to the analyst, the position that Brazil adopts from now on will influence its perception by the international community much more than any comment made by President Jair Bolsonaro during his visit to Moscow last week.

In speeches after his meeting with Putin in the Kremlin last Tuesday (16/02), Bolsonaro avoided mentioning Ukraine, but emphasized the commitment of Brazil and Russia to peace.

“We preach peace and we respect all those who act in this way, after all this is in the interest of all of us: peace for the world”, he said. At another time, the Brazilian president also highlighted the proximity of values ​​cultivated by the two nations.

Bolsonaro’s statements went against governments like the United States and, according to analysts, the visit itself at a time of so much tension may have caused discomfort.

On Friday (2/18), White House spokeswoman Jen Psaki said that Brazil “seems to be on the opposite side of the majority of the global community” in relation to the conflict between Russia and Ukraine.

For Oliver Stuenkel, however, Brazil will have new chances to position itself now that the threat of invasion has become even more urgent. “Everything will depend on Brazil’s behavior in the Security Council votes,” he says.

The expert’s expectation is that Brazil will adopt the most neutral stance possible, abstaining from motions against Russia, as it did after the invasion of Crimea in 2014. “But given the seriousness of the violation, we may face more criticism and pressure from the of the United States”, he evaluates.

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