Energy and the dollar exchange rate (Brazil)

Energy and the dollar exchange rate

Energy projects in Brazil depend on many imported items and therefore are greatly influenced by the Dollar x Real exchange rate.

Economists have pointed to two factors that tend to bring the Dollar up.

1°) Lower prices of exported products

Agricultural products” is the most important item on the Brazilian export agenda. The commodity prices have systematically fallen and tend to continue this trend, reducing the inflow of Dollars.

2°) Lower interest rate

The Central Bank should reduce the interest rate. This measure has as a side effect the withdrawal of resources that international investors brought to Brazil. Massive volumes will leave Brazil.

So with less Dollars coming in and more going out, by the law of supply and demand, the quotation should go way up!

The effect in the energy area will be the future increase in project costs, in BRL.