The Brazilian Real and Mexican peso have both rebounded strongly in recent weeks, but their rallies are starting to diverge with the peso running out of steam and the Real gaining momentum.
Financial and political turmoil that have Brazil on the brink of a depression is also contributing to one of the best years ever for domestic farmers. Economic stress and a weak currency has facilitated export revenue for everything from soybeans to beef to coffee.
Brazil’s currency closed on Monday at the weakest level ever against the dollar as raging economic and political situations increased uncertainty and the odds of the country losing its investment-grade credit rating from yet another ratings company, which could be catastrophic.
A day after Standard & Poor’s slashed Brazil’s credit rating to junk, the Brazilian Real lost close to 2% by the end of the day to 3.865 per dollar—its weakest level since 2002. In an effort to stem the decline, Brazil’s central bank injected $1.5 billion into the financial system Thursday.
A sharp drop in Brazil’s financial markets signalled investors are unsure whether the newly re-elected President Dilma Rousseff will take the necessary steps to reinvigorate the country’s stalled economy.
The following article was published by Canada’s The Globe and Mail and gives an insight to investors thinking from the north regarding Latinamerica’s two largest economies, Brazil and Mexico.