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Montevideo, October 19th 2021 - 12:10 UTC
Brazilian Finance Minister Guido Mantega said foreign-based companies operating in Brazil should consider sending some profits home as the exchange rate is unlikely to remain as favorable as it is now. Read full article
they may send all there profits to us if they want,
Japan is also having troubles with a rising yen. Other countries are also working hard to keep their currencies from appreciating.
China artificially maintains their currency super undervalued and their huge trade imbalances are affecting the entire world.
I've heard - I don't remind from where - the yuan is not considered much overvalued.
Hmmm..I had this discussion recently with my friends here about why it's much better in the long term to have a strong currency.
In my opinion with a strong currency, what is reliable, stable enough, backed by a strong producing economy is good for the population of that nation where they use that currency locally. A stronger (reliable/stable) currency means: purchasing power for the people who use that currency. Very important. The more worth/strong your money, the more you can buy with less money. Now people say, Oh, but that's bad for your exports. Yes, but you can solve that problem by lowering and sweetening the investments environments by keep the capital gain taxes on a level that's competitive with other nations, reform your tax code (what many nations need and in my opinion a flat tax is the best), or perhaps also the pension system ( what is necessary in some nations) and not to forget, cut government (Keep government small, but not to small, meaning have short, effective but powerful regulations). Those are steps you can take to stay competitive with a strong currency.
With a strong currency, the population has not only a strong purchasing power but also a strong savings rate ( after spending on the basics). In nations with a strong currency, the people are also more involved in politics. Why? To protect their own wealth.
If the goal of Brazil is to expand its economy rapidly and get millions of its people out of poverty, that can only be done by means of maintaining their currency at competitive levels with similar countries with which they compete in world markets, namely China, India, Russia and even Turkey or Mexico and other countries with capacity to manufacture valued goods at competitive costs.
Having a strong currency means that goods manufactured in the country will become more expensive in world markets, and will not be able to compete against the same kind of goods made in China, India and other countries Brazil purports to compete against. So investors, both foreign or national, will have to think twice before opening a manufacturing facility in the country, if they can't hedge on a competitive foreign exchange rate, they will take their precious investments, know-how, technology transfer and good paying jobs to other countries where they can lock in on their exchange rate in order to keep their costs down, such as India or China.
This is important because to maintain Brazil's high growth rates that growth has got to come from outside markets, as if has been in the past few decades and if the economy is to rely only in its internal markets, it will be crippled by the inner market limitations, provoking economic stagnation without the influx of fresh foreign capitals.
To keep people out out poverty, they need to be independent. With a strong currency they have purchasing power (low/stable inflation).
How can you still have a strong/productive manufacturing base and exporting economy? Reform your damn outdated tax code, lower the capital gain taxes (not to low, but try keep it competitive compare to other nations) have regulations, but short and understandable to keep it wide open for foreigners who are wiling to invest in your country. Also make sure the government cut wasteful government spending. All those things plus that is also how you can keep prices low and keep foreigners and locals investing in the home nation. You believe China can keep those silly wages what they pay to their slave workers? No, and they know that, that's why slowly they reform their whole system, rather than keep raising and raising their salaries. When their money is more worth, that little bit what the Chinese are earning will give them more purchasing power than what they have today. they will still stay an export nations with the right fiscal policies + the Chinese can buy their own goods and be less depended on only exporting. Brazil can do the same thing. My country thinks that pushing the value of the yuan up, the manufacturing base will come back..HA..wrong, because they don't like being taxed deep in their ****. So Brazil, this is your chance to learn from the mistakes up north.
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