Meirelles warns of a strengthening dollar.

247 - Henrique Meirelles, former president of the Central Bank, warns: the American currency tends to appreciate, and this requires new considerations in the management of the Brazilian economy. According to him, the US$380 billion in reserves cushion potential crises, but capital flows tend to change direction. Read below:

Warning about a strong dollar.

Many analysts are predicting the end of the era of a weak dollar against a broad basket of currencies.

In Brazil, when the real depreciates, many people talk about the dollar rising. Yes, it is an increase in the dollar against the real, but not necessarily against other currencies.

What is being discussed now is the strengthening of the dollar against most currencies, regardless of the real.

The dollar has undergone a historic process of depreciation due to growing US trade deficits, generated by increased imports of consumer goods and energy over decades.

The crisis reversed this trend. Risk aversion generated high demand for the dollar as a store of value. But it depreciated again with the Fed's (the US central bank) aggressive liquidity-boosting program.

Now, with the approach of the normalization of American monetary policy, the strengthening of the dollar is expected to continue. There are reasons for this.

The American economy adjusted before Europe and Japan, restoring banks' lending capacity relatively quickly. Meanwhile, American companies invested heavily in productivity and restructuring, increasing profit margins even with the slow economic recovery.

Meanwhile, shale gas exploration has progressed rapidly. The US is not only regaining energy self-sufficiency, but is undergoing a process of reindustrialization led by energy-intensive sectors, as the price of gas in the country has become lower than in other countries.

In conclusion, the American fiscal adjustment, which would lead to the dreaded fiscal cliff, is having a smaller negative effect than expected in the short term and a positive effect on long-term expectations.

All of this strengthens the dollar and consequently leads to a change in capital flows, which, combined with the future prospect of rising interest rates in the US, should be a matter of attention for the economic authorities of countries that have low savings rates and need external resources to grow, as is the case of Brazil.

There is no doubt that there is no crisis in sight, since the Central Bank of Brazil's US$380 billion in international reserves provide an adequate buffer for any future adjustment.

However, we must think carefully about our growth model, aiming to avoid problems in the future, when a shift in global capital flows occurs due to an American economy attracting some of the capital currently destined for other countries.