- It is just about the only investment grade country where inflation is slowing, the central bank has been easing, and where you can pick up a yield of over12% for 10-year paper.
- Its most recent change was a credit upgrade last September (Moody’s) and overall the rating agencies are generally favourable over the outlook.
- The inflation rate is 4%, slowing down and at the low end of the range of the past decade.
- The current account is in very small deficit, at just over 1% of GDP.
- The debt ratios are very well contained – 12 % gross external debt and 43% government debt as a share to GDP (the US comparables are 95% and 62% respectively).
- The real is on an appreciating track (+27% in the past year) and that is because Brazil’s terms-of-trade (export price to import price ratio) is flirting near a 12-year high.
- Given that real short-term rates are around 4.5% and the consensus view is 5% real growth this year, there would be little reason to be bearish on the currency outside of a currency setback (and FX reserves at $240 billion are up 15% in the past year and 30% in the past two years.
impair the commodity complex as this would undoubtedly reverse the impressive gains made in the currency — after all, it’s not coffee that is Brazil’s primary export but iron ore; and it is not the USA but China that is the country’s largest customer.