The real, which on Thursday closed at R$2.36 against the dollar after the Banco Central’s announcement that it was putting US$50 bn into the currency futures market, may have reached fair value after a long period of overvaluation, according to John Authers.

This drop was against a day’s high of R$2.52 as markets reacted to the announcement of the  Medida Provisoria 443 which allowed Banco de Brasil and Caixa Economica, two State run banks, to buy stakes in private financial institutions, which have come under pressure due to the dying up of the international credit markets.

Many believe the real will eventually stabilize at around R$2.00. So far this month, investors have taken out more than US$5bn, adding to the US$1.8bn taken out in September.

Meanwhile, lack of financing options has put many projects on hold for the time being. Aracruz, the cellulose firm that admitted to large losses in the currency derivatives market earlier this week,  has put construction of a US$2.4bn plant in Rio Grande do Sul on hold.

Petrobras, which only last week was declared by President Lula was able to finance its investments from its own reserves, is now revising its outlay plans with chief executive Sergio Gabrielli citing ‘too many uncertainties’…

4 articles from RGE Monitor:

Jose Antonio Ocampo: The Latin American Boom is Over

Maurico Cardenas: Global Financial Crisis: Is Brazil a Bystander?

John Williamson: The Impact of the Global Financial Crisis on Brazil

Victoria Saddi: A Revised Outlook for Latin America