U.S. dollar weakens in Brazil

February 5, 2013
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Dollar Weakens in Brazil

International businesses that are attempting to negotiate deals in Brazil would be wise to pay attention to the finances and economy of this country before making any long-term investments. This includes understanding the national tax laws as well as any other legal implications of trade within the nation. Working with a Brazilian law firm could prove beneficial for U.S.-based businesses that are considering expanding to this nation.

Forbes reported that the dollar is losing value in this country because the Central Bank prohibited its circulation out of currency markets for a number of months. The Central Bank finds a weakened dollar tolerable in order to strengthen the national economy and cut inflation, which is around 6 percent.

“Given our estimates of exchange rate pass through, the Central would have to guide the real about 10 percent stronger to make any meaningful dent in inflation,” Tony Volpon, a managing director at Nomura in New York, told the source. “We see the bank’s guidance of a stronger real as being limited in nature and serving more as a signal of its worry over the inflation outlook and an attempt to manage inflation expectations.”

However, the weakening dollar in Brazil has caused other problems, such as the country’s lack of competitiveness in the global markets, whether it comes to the shoe trade or other items. Currently, the stock market in this nation is declining while the unemployment rate is shrinking. At the end of 2012, this rate was only at 5.5 percent, which is the lowest its been since 2002. While the economy may have dropped, the currency is currently strengthening.

U.S.-based businesses will have to consider all of these factors when initiating deals, mergers, acquisitions or other transactions with companies located in this country. With the help of a Brazilian lawyer, international firms will be able to follow the business laws in Brazil.

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