Opinion – Vinicius Torres Freire: Real is the currency that appreciated the most in 2022, but the dollar is still expensive

The real was the currency that appreciated the most this year, among the 38 monitored by the IMF, all those that matter, the money of countries that make up almost the entire global GDP. In the March average compared to the December 2021 average, the dollar fell by almost 11%. Comparisons are of nominal values ​​(ie, they do not discount for inflation or correct the exchange rate for other relevant factors).

It is the most relevant economic history of the times, because the country does not have an economic policy itself, being adrift or in inertia. As far as matters are concerned, only the decisions of the Central Bank remain, now almost in the wake of what will happen with world commodity prices. In addition, there is always the possibility that the government will go beyond what is already known and blow the bills in order to win some votes.

The exchange rate can give inflation a refresher. Few people dare to talk about it because:

1) The recent appreciation of the real barely compensates for the huge fall that occurred in the epidemic, up 30.5% in the dollar from February 2020 to December 2021;

2) Just as the recent rise was a surprise, it is also difficult to say how long it will last, which depends on the moods of world finance, the size of the tumble that the global economy will take with the war in Ukraine or the amount of nonsense we will listening in the election campaign, to name just a few;

3) The price of basic goods, commodities, has risen so much this year that the rise in the real is still drying up inflationary ice. Furthermore, domestic inflation has spread (prices in various economic sectors rise, although not wages, it should be noted).

Still, it’s the news we have; it can be a source of relief, with some luck and with the containment of domestic madness (we like to shoot in the foot, in the chest and, in the last ten years, in the head). Yes, the movement does not only occur in Brazil, but with some currencies in the world, in particular those of Latin American countries, which all suffered a lot in exchange in the first two years of the epidemic.

For now, the rise of the real in relation to the dollar does little to refresh the heat in the boiler that is world inflation. The price of oil (Brent type) has increased by about 50% this year. Gasoline, 47%. Wheat, 46%. Soy, 29%. Iron ore, 20%. Fat ox, however, and sugar were almost the same. The accounts are contained in a report by economists from Bradesco (which dealt with another matter and which has nothing to do, necessarily, with the argument of these lines).

It is worth remembering that neither the variation in world prices nor their translation into reais are immediately or fully transferred to domestic prices. Inflation at wholesale or for producers does not simply turn into consumer inflation. That said, we can see that the order of magnitude of the increases in commodities and the appreciation of the real is different, for the worse.

The dollar dropped to R$4.84 this Wednesday. In the last working week, it was R$ 5.02. On average in December, it was R$ 5.66. In February 2020, the last month before the “official” start of the pandemic, at R$ 4.34. In January 2020, at R$ 4.15 (always in nominal values, without any type of correction). The real still needs to eat a lot of rice and beans, which are expensive, to recover. In theory, it will be very difficult to return to the values ​​of early 2020, but refreshments can still come ahead. If there were a government, we would not depend so much on this handout of world luck. But it’s what we have. If the presidential candidates say the same thing, a kind of pre-government of 2023, it also helps.