Brazil’s Economy Minister says the real will strengthen and it would be “great” for the dollar to fall

BRASILIA (Reuters) – The Brazilian real is poised to strengthen against the dollar as the country emerges from the “difficult and turbulent” phase that has contributed to its recent weakness, Economy Minister Paulo Guedes said on Tuesday.

“This is normal, the dollar has risen a little bit now. But the (trade) surplus is very strong, the dollar is going to start to fall. This is normal,” Guedes said in testimony before Congress when asked about the decline of the real. He also added that it would be “great” for the US currency to depreciate.

The real lost nearly 30% of its value last year, when Brazilian interest rates fell sharply to a record low of 2% in response to the COVID-19-induced recession. Earlier this year it fell more than 10% when a deadly second wave hit and investors worried about the fiscal outlook.

The Brazilian currency recently recovered, trading at 5.34 per dollar last week, its strongest level since early February.

According to Guedes, the equilibrium rate of the dollar “is not as high as it is now,” but uncertainties surrounding the virus, the economy and the government’s reform agenda – including its own future – have contributed to the weakness of the real.

Guedes said last month that the real was exceeded lower and that its equilibrium level is likely to be around 4.50 to the dollar.

The minister told lawmakers that a “sense of mission” and “obligation” have kept him in office giving his all, even though many people have assured him that he does not need the stress that comes with the job.

Early in his testimony, Guedes said the government is considering a new program to help informal workers who do not receive government pay during the COVID-19 pandemic.

(Reporting by Isabel Versiani and Gabriel Ponte, Written by Jamie McGeever, Edited in Spanish by Carlos Serrano)