Marina wants a completely floating exchange rate between the real and the dollar.

The Central Bank's program that regulates the fluctuation of the Brazilian currency against the US dollar is nearing its end, according to economist Alexandre Rands, who announced this to Reuters in the event of a victory for Marina Silva. "We're going to end this," he stated, referring to the auctions the Central Bank holds to sell dollars to the market and thus balance the exchange rate with the real. "We won't have this policy of more than a year just valuing the national currency," he said, one of the formulators of Marina's economic program. If the value of the dollar against the real explodes, what could happen to inflation? Is the country mature enough to abandon defensive strategies in the face of international volatility?

September 11, 2014, 21:51 PMUpdated July 05, 2018, 15:38 pm

The Central Bank's program that regulates the fluctuation of the Brazilian currency against the US dollar is nearing its end, according to economist Alexandre Rands, who announced this to Reuters in the event of a victory for Marina Silva. "We're going to end this," he stated, referring to the auctions the Central Bank holds to sell dollars to the market and thus balance the exchange rate with the real. "We won't have this policy of more than a year just valuing the national currency," he said, one of the formulators of Marina's economic program. If the value of the dollar against the real explodes, what could happen to inflation? Is the country mature enough to abandon defensive strategies in the face of international volatility? (Photo: Marco Damiani)

247 – Candidate Marina Silva's economic policy received its most important signal yet today regarding how she intends to deal with the exchange rate. Her approach will be the complete opposite of what the Central Bank has done so far under Dilma Rousseff's administration. In the last year, under the justification of controlling inflation, the Central Bank has been conducting regular auctions of US dollars in the market as a way to prevent an explosion in the dollar's exchange rate. Marina, it is now known thanks to an interview with Reuters by economist Alexandre Rands, one of the formulators of the candidate's government program, intends to do things differently.

He said "let's end this" to tell Reuters that the auctions will end.

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EXCLUSIVE - Marina's government would end the Central Bank's exchange rate intervention program.

By Alonso Soto

BRASILIA (Reuters) - A government led by Marina Silva would end the Central Bank's current exchange rate intervention program, which has kept the Brazilian currency artificially strong for more than a year, Alexandre Rands, economic advisor to the PSB presidential candidate's campaign, told Reuters on Thursday.

"Let's put an end to this," Rands said when questioned about the central bank's daily intervention program in the exchange market. "This doesn't mean there can't be small, momentary interventions to eliminate volatility, but not a policy of more than a year simply appreciating the national currency."

Since August of last year, the Central Bank of Brazil, under President Dilma Rousseff's administration, has maintained a program of intervention in the exchange market with the goal of reducing market volatility. This began when the US dollar approached 2,45 reais, amid uncertainties about the direction of the ultra-expansionary monetary policy of the Federal Reserve, the central bank of the United States.

Rands also said that Marina, if elected, will prioritize the fight against inflation through reductions in public spending and improved efficiency in tax collection. According to him, the budget cuts in the Union Budget in 2015 could reach "up to 100 billion reais" to generate a primary surplus that helps reduce inflation.

The economist also stated that a Marina administration would seek to reduce the official inflation target, which is currently 4,5 percent per year, with a tolerance margin of two percentage points above or below.

Regarding the benchmark interest rate, Rands said that the current level of the Selic rate, at 11 percent per year, may be "more than enough" to control inflation if supported by fiscal policy.

"Perhaps with Marina, this 11 percent rate would be more than enough to control inflation, provided you have proper fiscal management," he said.

Marina, who rose to the presidential race after the tragic death of socialist candidate Eduardo Campos in a plane crash in August, has appeared in voting intention polls tied in a simulated second round with Dilma, who is seeking re-election.