Brazil’s Currency to Strengthen With Reforms, Economy Chief Says

• Brazil’s real will strengthen and the economy will beat expectations this year as privatizations, investment and structural reforms turn a cyclical rebound into a sustained recovery, according to Economy Minister Paulo Guedes.
• A long-delayed tax bill is making progress in the legislature while resistance to a planned overhaul of public sector careers is falling, the minister told Bloomberg News on Thursday, forecasting both proposals to be approved this year. While the first reform is designed to improve Brazil’s business environment, the second intends to reduce the costs of public servants over time.
• “As reforms make progress, everybody will see that the currency is mispriced, that it will strengthen,” Guedes said during a two-hour interview at his office in Brasilia. “The currency had an overshooting and is now finding its equilibrium.”
• The Brazilian currency lost about a quarter of its value in 2020 amid investor concerns about excessive public spending during the pandemic. A recent surge in commodity prices, coupled with aggressive interest rate hikes by the central bank and an improved fiscal outlook have helped to shore up the real in the past few weeks. It is now up about 5.8% since the end of March, the world’s best performing major currency.

(Source: Bloomberg)