2015 2016 2017 2018 2019(*)
Exchange rate R$/US$ (end of year) 3,9 3,25 3,25 3,87 4,04
Exchange rate R$/€ (end of year) 4,21 3,65 3,97 4,43 4,49
Exchange rate US$/€ (end of year) 1,08 1,123 1,22 1,145 1,11

(*) at 24/10/2019

For those who invest from abroad, the relative value of the currencies is of fundamental importance. To take a simple example, a company with an Ebitda of R$ 1,000,000.00, at the end of 2016 could count on a consideration of US$ 307.692,00; with the same performance, at the end of 2018, the consideration was US$ 258,397.00. To date, October 25, 2019, it would be US$ 247,524.00

That is, to bring home the same result in 2016 dollars, the company should have, in October 2019, an Ebitda of R$ 1,243,000.00.

It is clear that, in this context, the exchange rate trend becomes a management variable more than an exogenous factor.

The exchange rate factor is of fundamental importance in decisions about whether and how much to invest in Brazil. In the case of acquisitions or investments, the current period and 2019 as a whole is a particularly favorable time for foreign companies; less favorable for those in Brazil who were already and are currently serving a particularly weak real.


What happened in the last few months?

– towards the end of 2017 there was a significant devaluation of the dollar against the euro, while the US currency maintained the same level on the real (around 3.25 for a long period). Result: a devaluation of around 9% of the real against the dollar

– in the first few months of 2018, a process of dollar appreciation began on the euro (increase in the US discount rate and announcement of the near end of Quantitative Easing by the ECB)

– at the same time, the economic instability in Brazil (truck drivers’ strike, electoral uncertainty, economic slowdown mainly) has caused a real devaluation of the dollar of 14%

– with the election of Bolsonaro, October 2018, the expectation was that of a revaluation of the real (in fact immediately after its election it was revalued by 13%), but during 2019 the modest performance of the Brazilian economy led to to a new devaluation of around 7% on the dollar (from January to October 2019).


What awaits us in the coming months?

First of all we must always keep in mind that the foreign exchange market is very volatile and that its trend is not very predictable. It is easy to err in forecasting, because both internal and external factors contribute to each country.

The graph below shows the dolar/real exchange rate trend from 2016 to today. In 2016 the maximum value was reached on February 19th, the day when 4.50 reais were needed to buy one euro. It was the day on which the Dilma government reduced the forecast of reducing public spending, thus admitting a budget deficit for 2016.

The new high was added on 13 September 2018, when a euro was traded at 4.92 reais (and a dollar at 4.20 reais), before the election of Bolsonaro brought it back to around 4.15 / 4, 20 reais.

Among these two “peaks”, a period of significant revaluation of the real (below the price of R$ 3.10 for one dollar) after the impeachment of Dilma, ended in April 2017 with the crisis caused by the revelations of Joesley Batista.

dollar real 2019 ok

.In the last few weeks the dollar is moving within the 4.05/4.20 range, but what can be expected in the coming months?

In favor of the enhancement of the real:

– The pension reform has been approved and the economy is showing signs of increasing growth.

– The prices of many Brazilian assets are still very low, in foreign currency. If investors regain confidence (and here the role of the government is fundamental) foreign direct investment (IED) could generate a significant income of hard currency.

– In the short term, the likely success of the pre-sal auction should lead to an entry of about 106 billion dollars.

– The Brazilian trade balance, thanks to the export of agricultural and mineral commodities, is still positive. From this point of view, there is a positive entry balance of dollars estimated at 40/50 billion dollars/year.


In favor of the devaluation of the real:

– The discount rate (SELIC) is at historic lows (5.5%) and makes investments in Brazilian bonds less attractive. Although inflation is also at very low levels, real yield is much lower than – for example – in 2016: today the real rate is 1.3%, in 2016 it was 6.9%.

– A real devaluation increases the competitiveness of Brazilian products on foreign markets. With inflation at almost European levels and falling despite the weak currency, Banco Central does not need to intervene in the foreign exchange market to contain the prices of imported products.


If inflation were to remain under control even with more sustained GDP growth, the weakness of the real is likely to continue in the coming months. However, the most consistent economic recovery scheduled for 2020 (around + 2%) should lead to the entry into Brazil of a significant flow of foreign currency.

It is therefore possible a revaluation of the real on the dollar in 2020, returning to prices fluctuating between 3.65 and 3.85.