Currency crisis in Brazil is unlikely, says Delfim Neto.
According to the former Finance Minister, however, "the exchange rate is a serious problem" that will only be resolved when the domestic real interest rate is equal to that recorded by most countries.
Former Finance Minister Delfim Netto stated today that he does not believe Brazil will experience a currency crisis. "There has been a recent movement regarding the international appreciation of the dollar. The Central Bank did the right thing in providing liquidity to the market," he commented, after participating in the 8th Economics Forum of the Getúlio Vargas Foundation in São Paulo. "A floating exchange rate is like this: initially it varies, but then it adjusts," he highlighted in his lecture at the event.
For Delfim Netto, however, "the exchange rate is a serious problem" that will only be resolved when the domestic real interest rate is equal to that recorded by most countries. The former minister stated that the government has acted correctly in reducing the Selic rate, as the Central Bank realized that the international crisis has very serious effects on the level of global activity, with deflationary impacts. "Tombini is much more in tune with the monetary reality of the world than all the financial analysts," he commented, referring to the president of the Central Bank, Alexandre Tombini.
Delfim Netto mocked analysts who complained about the fluctuating exchange rate when it was at R$ 1,52, but when the rate hit R$ 1,95, as happened last week, began to clamor for "rapid" intervention by the Central Bank. The former minister is not in favor of excessive appreciation of the real against the dollar, but defends the Central Bank's action so that the market functions without strong oscillations. "Volatility will remain for a long time," he stressed, referring to the fact that the US crisis will not end before the 2012 presidential elections and that the problems in Europe are also very serious.
The former minister emphasized that Brazil is fully capable of growing at an average of 4% in the coming years, with inflation of 4,5%, while simultaneously improving the population's income and maintaining a good level of employment for workers. "Dilma is a hardworking and very competent person," he said in the lecture, adding ironically that her only flaw is that she read books written by the country's great economists.