Brazilian Real is at 3.06 against the USD!

Two years ago I said the real would be at 4.00 to 1.00 by the end of 2015.Today it got to 3.99 ! I say it will get to 5.00 to 1.00 by the end of 2016 .Great time to maybe buy some rental property !  I feel read bad for the people of Brazil though!!!!!!! 

Well, I don't know about the greenback reaching R$5, but I'm sure the climb hasn't stopped just yet. I feel sorry for expats here like Victoria who are faced with substantial losses converting their Brazilian incomes and savings back to the USD. To see 3/4 of your savings wiped out in a heartbeat must be pure hell.

I'm in a rather strange position because the Canadian buck is worth less than the greenback. I don't have a bank account in Canada, mine is in the USA with TD Bank, so my Canada Pension Plan retirement pension is converted to USD and deposited to that account, so I lose on the exchange rate.... but when I withdraw it at the ATM here, with the strong USD I make much more than I lost in the exchange from CAD to USD. Need I say that I'm dancing in the street over this little fact???

Cheers,
James         Expat-blog Experts Team

It is almost amazing how fast the drop in reais has happened but it is both a combination of the caos is Brazil as well as the very fast strengthening of the US dollar - most currencies in the world has weakened compared to the US dollar but Brazil is of course in a division of their own due to the political crisis and the budget deficit.

I see that most news outlets in Brazil is operating with something called "primary" federal budget deficit where they now forecast a minus 0,5 % for next year but this is a figure based on their budget before payment of interest and installments - if you calculate these in, their deficit is estimated to be closer to 9% !!! - in one year. Not even Greece has been close to that kind of figures - no wonder S&P downgraded their debt and that would just increase the interest rates on their debts.

At some point the devaluation of the reais will stop (Unless the politicians decide to start printing money to pay - then we end with hyperinflation again - would not be the first time) but when this will happen i guess is almost impossible to predict.

Either way the economic dowturn has still a long way to go before it bottoms out - the real estate market is still in a bubble - at least according to official figures which i do not beleive even for a second. IMF now estimates that unemploymet will reach 8,5 % next year based on the last official figure of 7,8 % for August - what a joke - it will pass 10 % before the end of the year.

No matter what the figures ends up with, it is a tragedy for the "middle class" of Brazil - most of them works incredibly hard with horribly commutes to work every day, incredibly high taxes, crime out of control and a political class that are just corrupt and completely incompetent.

And still most of them are able to enjoy a day at the beach and a churrasco with a smile - i guess that is why most of us expats still love Brazil - it takes more than bad politicians and an economic dowturn to destroy a good day. Sometimes it is better to live in  the moment.

The single largest reason for the ever dropping value of the Real is the lack of foresight on the part of Brazilian politicians and economists who allowed this country to put all of their eggs into one basket. Brazil's almost exclusive reliance upon China as it's major trading partner was a fatal error, now that the Chinese economy has tanked, and Brazilian exports to China have virtually dried up we're suffering the all too foreseeable results of failure to diversify our trading partners.

Another great failure of this government's policy is their myopic decision to export raw materials to countries like China rather than insist on exporting them finished goods or at the very least partially finished goods. That would build Brazilian industry, Canada made the same mistake many years ago and finally saw the light. Then they enacted laws that made it much more difficult for China to buy up Canadian raw materials, forcing them to buy our finished and partially finished goods, or build plants in Canada to manufacture there. Hell, Brazil is a whole lot bigger and has more clout than Canada, they just lack the balls to stand up to China.

Cheers,
James    Expat-blog Experts Team

rc206 wrote:

Two years ago I said the real would be at 4.00 to 1.00 by the end of 2015.Today it got to 3.99 ! I say it will get to 5.00 to 1.00 by the end of 2016 .Great time to maybe buy some rental property !  I feel read bad for the people of Brazil though!!!!!!! 

If this is true, you need to be my financial advisor. Lol!

I didn't foresee the devaluation of the Brazilian real, but I did predict a real estate market crash 18 months ago ("What goes up...must come down."), which was right around the time that I got engaged and was pondering a move to Brazil. While the real estate market hasn't crashed and burned just yet, housing prices are indeed dropping...my husband and I are in escrow on an apartment right now but before we found this apartment, we had looked at various properties in our city for almost 6 months, and owners who can no longer afford to hold onto their properties are finally starting to cut their asking prices. By the end of this year, I think we'll see a more rapid decline in prices.

James wrote:

Well, I don't know about the greenback reaching R$5, but I'm sure the climb hasn't stopped just yet. I feel sorry for expats here like Victoria who are faced with substantial losses converting their Brazilian incomes and savings back to the USD. To see 3/4 of your savings wiped out in a heartbeat must be pure hell.

I'm in a rather strange position because the Canadian buck is worth less than the greenback. I don't have a bank account in Canada, mine is in the USA with TD Bank, so my Canada Pension Plan retirement pension is converted to USD and deposited to that account, so I lose on the exchange rate.... but when I withdraw it at the ATM here, with the strong USD I make much more than I lost in the exchange from CAD to USD. Need I say that I'm dancing in the street over this little fact???

Cheers,
James         Expat-blog Experts Team

James, my husband and I are currently in escrow on an apartment. We decided to hedge our bets and dump our savings into real estate before things get any worse. Perhaps we could have waited longer since I'm 100% certain that housing prices will drop even further, but we found a beautiful apartment on one of the nicest streets in the ritziest neighborhood of our city at a fair price and we couldn't pass it up. If all goes south, at least we'll have our apartment.  

And since my husband and I are truly permanent residents that don't plan on leaving Brazil anytime soon, we will just have to wait out this economic crisis...whether it lasts 2 years or 10 years. Luckily, we both have good, stable jobs. Hopefully, we'll be able to ride out this "perfect storm" and emerge intact when the storm is over.

Good to hear that Victoria. Always nice to find something that's reasonably priced.

You're absolutely right real estate over the long-term is always a sound investment. It goes up and it goes down, but those are cycles everywhere... in the long-term real estate always keep on an upward trend overall.

Like the old Mark Twain saying goes....


It's always been true, and that is good old fashioned conventional wisdom.

Cheers,
James    Expat-blog Experts Team

Cabo Frio wrote:

No matter what the figures ends up with, it is a tragedy for the "middle class" of Brazil - most of them works incredibly hard with horribly commutes to work every day, incredibly high taxes, crime out of control and a political class that are just corrupt and completely incompetent.

And still most of them are able to enjoy a day at the beach and a churrasco with a smile - i guess that is why most of us expats still love Brazil - it takes more than bad politicians and an economic dowturn to destroy a good day. Sometimes it is better to live in  the moment.

I think what you described is precisely the problem. Living "in the moment" is not going to fix this country's problems. Brazilians are much too passive for their own good.( I know there are far worse countries to live in, but I live in Brazil, so I will just discuss the problems facing Brazil.) Brazilians live in one of the most dangerous and violent countries on earth with extreme class disparity, and yet no one seems to really want to tackle the issues at the root of this country's problems because Brazilians are too busy pointing the finger at the crooked politicians and at the poor, uneducated people of the Northeast for voting these politicians into power. I love my Brazilians friends, but Brazilians are their own worst enemy. Anyway, I've discussed this in my other thread, "How do you solve a problem like Brazil" so I'll just leave it at that.

James wrote:

Good to hear that Victoria. Always nice to find something that's reasonably priced.

You're absolutely right real estate over the long-term is always a sound investment. It goes up and it goes down, but those are cycles everywhere... in the long-term real estate always keep on an upward trend overall.

Like the old Mark Twain saying goes....
[img align=c]https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcT1uT6MmC2XSaRnNiMXIwAf-Jv19lqur0Gm_MgDxmsurTzzwziGBg[/url]

It's always been true, and that is good old fashioned conventional wisdom.

Cheers,
James    Expat-blog Experts Team

"BUY LAND, THEY'RE NOT MAKING IT ANYMORE." 

I love it! 

Brazil made a big mistake joining the BRICS . China and Russia will lead Brazil down a bad path.Brazil is making many of the same mistakes America did in 2009 .The dollar is 4.05 to  the real. I said it would happen and people told me I was crazy and a few on this site! LMAO

I have been looking at beach property in Northeastern Brazil.It's crazy that the prices are still way too high! The prices were overpriced in the first place and many owners refuse to drop their high prices.I will wait them out! lol

rc206 wrote:

I have been looking at beach property in Northeastern Brazil.It's crazy that the prices are still way too high! The prices were overpriced in the first place and many owners refuse to drop their high prices.I will wait them out! lol

Now might be a good time to browse...and if you see something you like, see if the owner is willing to negotiate.

4.2 to the Dollar today! ......Ok now I'm getting worried....
If it kkeps falling at this rate we'll see R$5 to the dollar at the end of next week!

25¢ COIN - FABRICADO NO BRASIL

Seems to be stabilizing a bit . My bet is that it will sit on about 3.7 to the dollar at the end of the year and strengthen a little in 2016 , but who knows?

I think the true Value is about R$3 to the Dollar ,realistically the best I think we can hope for in the next following year

http://www.wsj.com/articles/brazils-rea … 1443125945

Interesting article predicting the real bottoming out at 5.83 to the dollar

http://www.ft.com/intl/cms/s/3/7041b478 … z3msJDpkmn

stevefunk, I couldn't read either of the articles that you posted above because they both require subscriptions to their respective websites. So..... what does this mean? Will the real rebound? Or will things get worse? Your guess is my guess! 

Subscriptions? that's weird they were just free news articles...

The second one says the Real is still considered overvalued , will rebound in April 2017 and expect a low of 5.48 to Dollar....ho knows though

I personally feel that we will be very lucky if we see a stable R$3 to the dollar anytime soon.

One way around the pay wall on most of the english newspapers are to google the headline (or something in the headline) and then click on the google link - that way you will be able to read a few articles for free.

Thats how I find em ,just by googling

The real is better today at 3.91 .

I don't think the rollercoaster ride is over quite yet. With everything that's going on here in Brazil at the moment I think we're just somewhere in the middle. 

Great for people like me who are here for keeps and have an income in USD, but terrible news for anyone who needs to convert Brazilian earned income or assets back to USD before returning home.

Who knows, your prediction of R$5 isn't too far off at all?

Cheers,
James

The Real will rebound when oil prices rise, which we all know is inevitable. They'll probably hit the ceiling sometime in the future, but who knows how long we have to wait for that?

When the price of oil gets to maybe $100 per barrel, we'll be looking at 1.50 reals for a dollar.

If afraid that it isn't quite that simple. The Real won't rebound until this government does something concrete to deal with the constant scandals and corruption that is endemic in this country, and there is some semblance of political stability and rationale in this country. That's nowhere in sight right now.

Cheers,
James    Expat-blog Experts Team

Some good news for Brazil: the weakened Brazilian real means that Brazilians are buying more local products and helping to reduce the government deficit. Way to turn a negative into a positive!  http://www.wsj.com/articles/weak-econom … 1445617300

However...

“'Parts of the imbalances are being fixed,' said economist Alexandre Schwartsman, a former central-bank director. But he cautioned that it may not be enough. 'Brazil won’t have a recovery driven by the external sector,' he said, stressing the need to fix government finances and control inflation before Brazil can return to sustainable growth."

And it looks as if the Brazilian government is still spending like there's no tomorrow...

"Government spending also increased, widening Brazil’s budget deficit to 9% of GDP in August, from 3% in 2013. Inflation, meanwhile, jumped to 9.8%, more than double the official target."

This article from NYT should really frighten young Brazilians :

http://www.nytimes.com/2015/10/21/world … .html?_r=1

Greece has a healthy economy compared to Brazil - i do not think there is any reason to expect the Reais back to former glory anytime soon

"the Reais back to former glory anytime soon"
What worthless

Cabo Frio wrote:

This article from NYT should really frighten young Brazilians :

http://www.nytimes.com/2015/10/21/world … .html?_r=1

Greece has a healthy economy compared to Brazil - i do not think there is any reason to expect the Reais back to former glory anytime soon

What an enlightening article! I had somehow missed this one during my daily Googling, so thank you for sharing it. I was at dinner this evening with two of my Brazilian friends, whose friendship is very dear to me. When the Brazilian economy came up during our dinner conversation, they both mentioned something about "Bolsa Familia" and "Lula" and "Dilma" and how too much money has been squandered to help the poor. We also briefly discussed how China's current economic situation has hurt Brazil. At the risk of offending my dear friends, I played the devil's advocate. I said that I had recently read that Bolsa Familia was not the problem (only takes up 0.5% of GDP according to most estimates) and that Brazil's overgrown bureaucracy and outdated pension system (13% of GDP!!!) were the real problems. They didn't disagree with me but at the same time, the look in their eyes told me that I should tread carefully. One of my dinner friends works for a bureaucratic organization (and in the past, she had happily told me that one of the "perks" of her job is that she will receive 100% of her salary when she retires) and I know that her mother benefited from Brazil's pension system when her father passed away many years ago. She is a lovely person and is my dearest Brazilian friend and I want everything in the world for her because she is an amazing person...however, the system that benefits her is the same system that benefited her mother which is the same system that needs to be overhauled. 

These points in the article jumped out at me:

Brazilians retire at an average age of 54 54?! Really?!

When Rosângela Araújo turned 44, she decided that she had worked long enough. So Ms. Araújo, a public school supervisor, did what millions of others in their 40s and 50s have done in this country: She retired, with a full pension.   Why are Brazilians allowed to retire at 44, 49...or even 54 when they are perfectly healthy and able to work? I know the United States isn't perfect (in fact, the U.S. is SO FAR from perfect!) but it doesn't allow Americans to receive Social Security benefits until 62 (at which they only get 75% of their benefits - if they want 100% of their benefits, they have to wait until age 66 to retire).

“Making retirees pay the price is just not fair,” said João Pimenta, 63, a former director of a shopkeepers’ association who retired at age 49 and regularly leads protests against pension cuts in Brazil’s capital, Brasília. “Why isn’t the economic elite being called upon to sacrifice? I’m sick of hearing that normal people need to pay the price with their pensions.” Once again, why are people like Joao Pimenta retiring at 49, living off the government, and then leading protests against the changes that are necessary to save his country? Doesn't he realize that if his country doesn't survive, his pensions won't survive either? Do we blame it on greed? Ignorance? Laziness?

School and health budgets are being cut, and Ms. Rousseff is now proposing steps to keep pension spending from ballooning even more. But a rebellious Congress voted this year to significantly expand pension benefits. Ms. Rousseff vetoed the legislation, setting the stage for a bruising battle with lawmakers. Some of the president’s allies view the showdown as part of her opponents’ strategy to impeach her. - I don't know anyone who likes Rousseff - including myself! I think she definitely knew what was going on with Petrobras - how could she have not known?! But at least she's trying to keep the problem from getting worse than it is. Her political enemies only seem interested in gaining power for themselves...and they offer no real solutions for their country's problems.

“Brazil has three very clear options to prevent large increases in pension spending: Increase contributions, increase the retirement age, or decrease pensions,” said Mariano Bosch, a labor markets specialist at the Inter-American Development Bank. “All of those options are very unpopular.” -  If no one wants to pay more taxes, everyone wants to retire early, and no one wants to give up their pensions, then where does the solution lie??? If no one wants to sacrifice anything...then o meu Deus, Brazil is f*cked!

“Public pensions in Brazil have long been a slow-motion disaster,” said Raul Velloso, a specialist on public finances.“The difference now is that the debacle is accelerating, revealing to our children the political cowardice and irresponsibility our leaders are bestowing on them.” - Sadly, I agree. Not only are Brazilian politicians corrupt...they're also cowards. What an awful combination! They need to pass legislation/enact changes that are good for their country...even if the changes might be unpopular with the Brazilian people, but Brazilian politicians are too busy stealing money and worrying about their own asses to do what is best for their people and their country. What a truly unfortunate situation!

The article is not completely accurate and it seems the writer also is extremely biased given the dubious people he is using for sources.

Brazilians can retire after 35 years of service, so if a person began their worklife at 16 years of age the earliest they could retire is 51 and that would require them to have worked and contributed continuously. Most Brazilians actually retire at 66 and many are even now returning to work post-retirement.

Brazilians can retire for disability (as did former President Lula for losing his baby finger) at any age and I'm sure that they're including retirees for disability in the figure quoted in order to lower the average age. Newspapers and magazines thrive on sensationalism and are not always the best with the TRUTH. If Pimenta retired at 49 it had to be for disability since he could not possibly have retired for 35 years of service.

There is absolutely no way Rousseff didn't know what was going on at Petrobras, after all she was Director of Petrobras before she was President.

The cost of today's federal bureaucracy is some R$416 billion per year. Of that I can assure you that probably 1/3 of the civil service jobs could be eliminated tomorrow and nobody would miss them, since they aren't doing anything anyway. They're patronage jobs handed out like candy, and the people receive a salary for doing nothing. If everybody in government, who make ridiculous salaries in the first place was forced to take a 10% rollback that would save this country R$41.6 billion each year, more than enough to save the INSS, education and many other things.

I wonder why this article hasn't focused on the pensions of politicians??? They can retire after only 8 years and receive the full salary of the highest position that they've ever held during that time. So right now Lula, FHC, Collor, and Sarnay all receive the full presidential salary. In fact there's at least one person presently receiving the presidential retirement because he was interim president for one day while Lula and vice-president José Alancar were out of Brazil at the same time. ALL POLITICIANS at all levels of government receive that same right.

Oh and Victoria, when we talk about the cost of bureaucracy in Brazil, the truth of the matter is that the 13% figure you have is only the federal level. When we consider the bureaucracy on the state and municipal levels included with that the true cost to this country is 33% of the GDP, which goes to feeding the suffocating bureaucracy that Brazil is famous for.

Cheers,
James     Expat-blog Experts Team

James wrote:

Oh and Victoria, when we talk about the cost of bureaucracy in Brazil, the truth of the matter is that the 13% figure you have is only the federal level. When we consider the bureaucracy on the state and municipal levels included with that the true cost to this country is 33% of the GDP, which goes to feeding the suffocating bureaucracy that Brazil is famous for.

James, if your figures are correct (Where are you getting your estimates from?), then the problem is much bigger than I'd imagined. 

If I hear another word from any of my Brazilian friends about how Bolsa Familia is bleeding this country dry, I will have more than just a few words to say. I love my friends but they need to wake up and smell the coffee! Ignorance is bliss!

The 33% figure comes from the local media and has been given a number of times over the past years. I don't know the original source, but find it quite believable. When you consider what politicians and public servants are paid in this country.

Brazil, Where a Judge Made $361,500 in a Month, Fumes Over Pay

Believe me, the Bolsa Família IS NOT the problem with this country's economy and it actually costs very little compared to the overall good that it does. The problem is that opponents of the PT have seized upon it as the reason this country is going down the tube, incorrectly so. Many other countries have such a program, including Canada (The Family Allowance) which pays much more and in those countries it is UNIVERSAL, so it requires a greater portion of the country's GDP to pay those benefits. It works well there and hasn't lead to the ruin of the country.

Brazilians love to blame everybody else but themselves for their problems, this is the case with the Bolsa Família too. They want to blame this country's poor for the fact that they themselves don't know the first damned thing about politics and sure as Hell don't know how to vote, much less why or for whom!!!

Cheers,
James    Expat-blog Experts Team

I think Brazil is going to be another country, the "world" cant afford
A bit like Europe, "can't" afford Greece
Up the works party

The only saving grace for the other Mercosul countries is that unlike the Eurozone, we haven't had some idiot decide that all the countries needed to adopt a single currency, and take responsibility for all the other nations in that trading bloc. Brazil would be sure to break the bank!!! 

One day, they might ask "the Westerners" that live here, for help and put things right

Not likely Pete, Brazilians completely resist any suggestions from us gringos. They find it offensive to think that we actually might know how to make things work. They firmly believe that only Brazilians know anything at all about Brazil.

Cheers,
James

They might of thought, that know how to run a country
but by now, they must be thinking "maybe we don't", and the  gringos do

Pete, I'm sure you've been in Brazil long enough now to know that to a Brazilian admitting that we gringos know anything at all is an act tantamount to TREASON.   

your right,
So maybe we gringos, will be the only one's with any money
where I live. the Brazilians seam to not want to talk about anything
they seam to believe, If you talk about it then its going to happen
what I keep saying, it has already happened

James wrote:

The 33% figure comes from the local media and has been given a number of times over the past years. I don't know the original source, but find it quite believable. When you consider what politicians and public servants are paid in this country.

Brazil, Where a Judge Made $361,500 in a Month, Fumes Over Pay

Believe me, the Bolsa Família IS NOT the problem with this country's economy and it actually costs very little compared to the overall good that it does. The problem is that opponents of the PT have seized upon it as the reason this country is going down the tube, incorrectly so. Many other countries have such a program, including Canada (The Family Allowance) which pays much more and in those countries it is UNIVERSAL, so it requires a greater portion of the country's GDP to pay those benefits. It works well there and hasn't lead to the ruin of the country.

Brazilians love to blame everybody else but themselves for their problems, this is the case with the Bolsa Família too. They want to blame this country's poor for the fact that they themselves don't know the first damned thing about politics and sure as Hell don't know how to vote, much less why or for whom!!!

Cheers,
James    Expat-blog Experts Team

I find the same thing when i try to discuss politics - everyone obsess about the bolsa familia and other programs for the poor and how that is what has destroyed the economy. Ending bolsa familia now with the economy in a tailspin and the unemployment rising fast would only be counterproductive.

It is the same thing with Petrobras - everyone is obsessing about lava jato and how the corruption has destroyed the company - corruption is of course bad and lava jato has damaged Petrobras but mismanagement and waste has costed the company much more but nobody cares or talks about it even if the numbers are public. And now the company finds itself in a situation where they have to sell of assets for bargain prices just to survive but again, nobody cares or pays any attention of what is going on.

To have a functioning democracy, the public needs to pay attention - otherwise you end up like Brazil with only self-serving and corrupt politicians.

I think if the Brazilian government read some of what's said, they might kick some of as out of the country