The dollar and the electricity sector – Brazil

The dollar and the electricity sector – Brazil

The rise in the dollar’s value should significantly influence future prices for suppliers of solutions involving energy efficiency, local generation, power contracts, among others.

The reason is simple and well-known. Brazil depends on imports for a large part of the items it produces and sells.

A more expensive dollar generates higher costs in R$, the local currency.. There is also an underlying effect that is rarely discussed. But… very important. Country risk. Investors’ perception of the “weakness of the local currency” is reflected in the inclusion of a significant “spread”, which also generates higher costs.

I am not going into the merits of these two issues. I am simply identifying a scenario that has a high probability of coming to fruition. And that has the potential to greatly influence the decision-making processes of suppliers and consumers (companies and institutions) in the electricity sector.