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Brazilian Real Currency Report
Finance & Accounting
Pages 4 (1004 words)
(Name) (Instructors’ name) (Course) (Date) Brazilian Real Currency Report The Brazilian currency has steadily gained since 2003, with the exception of the 2008-2009 financial crisis and more recently when it was weakened by financial market turbulence. The bilateral rate against the (US) dollar appreciated by 75% from 2003 to 2010, hence triggering panic over the decline in competitiveness for Brazilian companies.
The objective of this paper is to shed some light on the key factors affecting the behavior (in terms of appreciation) of the real, and specifically to evaluate the extent to which the expanding size of Brazil’s oil sector in the economy has influenced the explanation of these events. Oil production in Brazil has been growing strongly since the turn of the millennium. A variety of energy policies which brought competition in the oil market and abolished subsidies to price controls and imports has supported these developments. This is despite the fact that the industry is still dominated by Petrobas, the state-owned corporation (Kumar 25). Going forward, Brazil’s economy is likely to become increasingly dependent on oil production, particularly of offshore oil, for both local use and export (Guimara?es 19). Petrobas discovered huge oil reserves that have been estimated to have the capability to double the country’s current reserves, propelling the country to among the top 10 countries with respect to oil reserves alone. Oil developments have had a significant impact in explaining the movements of exchange rates, in addition to traditional factors. ...
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