Hello, and welcome to our Weekly Report. In this issue: Brazil’s stock market hurt by a strong U.S. Dollar, Why incentives to the oil industry harm Brazil’s economy. And the most important facts of the week.
The week in review
- Economic Indicators. The effects of the 10-day truckers’ strike have begun to appear on Brazil’s economic indicators. The inflation rate for the month of May was 0.40% – above the market’s projection of 0.29%. Meanwhile, electricity consumption was down by 8.8%, and car sales dropped by 7.1%.
- The rise of the USD. After the USD rose to almost BRL 4 on Thursday, Brazil’s Central Bank decided to intervene and spend USD 20bn in swap contracts. The effect was immediately felt, as the USD crashed 5% on Friday, closing the day at BRL 3.709. Markets predict that the bank will soon raise the benchmark interest rate from 6.5% to 7%, despite its promises not to do so. In the long-term, the BRL is expected to continue to lose value due to electoral uncertainties.
- Oil & gas. On Ivan Monteiro’s first week as Petrobras CEO, Brazil auctioned offshore drilling rights in four deepwater reserves (one of which received no bids). The government raised BRL 3.15bn, showing that the appetite for Brazilian oil reserves wasn’t affected by threats of government interference over oil prices.