BRASILIA. – The price of the dollar in Brazil continues to rise and marked this Friday a new all-time high by exceeding 6.10 reais, driven by uncertainty around the government’s fiscal commitment Luiz Inácio Lula da Silva. Around 10 o’clock, the dollar was trading with an increase of 1.88%, with a value of 6.1016 reais, but then it began to fall before political messages on the controversial tax reform project.
Later, the dollar stopped its rise and began to fall, to 6,015 reais, after the speeches of the presidents of the Senate and the Chamber of Deputies, Rodrigo Pacheco and Arthur Lira, respectively, who reinforced the importance of the adjustment measures presented on Wednesday by the Minister of Economy, Fernando Haddad, although They pointed out a difficult path for the project that exempts from income tax (profits) those who earn up to 5,000 reais (about 840 dollars), the initiative that caused the devaluation.
“The issue of income tax exemption, although it is everyone’s wish, It is not on the agenda for now and can only happen if (and only if) we have the fiscal conditions for it”Pacheco said. Lira added that this project will only be analyzed next year and said that “fiscal responsibility is non-negotiable.”
At noon, it was the Minister of Economy himself, Fernando Haddad, who was more flexible about the project. “I have spoken a lot with the presidents of the House [de Diputados]Arthur Lira, and from the Senate, Rodrigo Pacheco, and there is alignment with the government. If there were any surprises, they were positive, including correcting distortions in the package. We can open the legislative year with corrective measures. “There is no arrogance on the part of the government and no one tries to sell fantasies,” Haddad said at a luncheon for bank directors, promoted by the Brazilian Federation of Banks (Febraban), in Sao Paulo.
On Thursday, the North American currency had already broken the 6 reais threshold for the first time in history. According to the Central Bank of Brazil, the dollar closed the day at 5.99 reais, while this Friday it opened again with a bullish trendreaching 6.0245 reais at 9.15 before continuing to rise.
The Real fell again today against the dollarArchive
For its part, the stock index Ibovespathe main one in Brazil, began the day on Friday with a slight drop of 0.22%standing at 124,340 points.
According to the statistical series of the state Institute of Applied Economic Research (IPEA), Since the real entered circulation in 1994, the US currency had never reached 6 reais.
The devaluation of the real It occurred as a result of the announcement of a package of fiscal adjustment measures by the Brazilian government, which seeks to contain public spending and reassure the markets. However, it was received with skepticism by financial analysts, who consider it insufficient to address fiscal imbalances.
The measurement package includes adjustments in salary ceilings and benefits for public employees, as well as in military retirements, with the objective of generate savings of 70 billion reais (almost 12 billion dollars) until 2026. He also proposes tax the highest income sectorsincluding taxes on large assets, inheritances and high-value financial transactions, and contemplates a tax reduction for middle-income citizens.
The measures “consolidate the government’s commitment to the country’s fiscal sustainability” for “a stronger, fairer and more balanced Brazil in the future,” Finance Minister Fernando Haddad said on national television on Wednesday.
But in parallel with the cuts, Haddad announced that he will favor middle-income citizens with a tax reduction – in the so-called income tax – as a counterpart to alleviate the social impact of the adjustment, which generated doubts among investors.
## Brazilian Real Rebounds After Tax Reform Uncertainty
**World Today News Exclusive Interview:**
**World Today News:** The Brazilian Real took a hit today, reaching a record high against the US dollar, fueled by concerns surrounding the Lula administration’s commitment to fiscal duty.the fluctuations seem to be directly tied to the controversial tax reform project.
**Can you help us understand the situation?**
**Professor Alexandre Teixeira, Economist at the University of Brasília:**
Certainly. The initial surge in the dollar’s value against the Real was prompted by market anxieties over the government’s proposed tax reform,especially the element concerning exemption from income tax for those earning up to 5,000 reais. While well-intentioned, such a measure would substantially impact government revenue and without clear compensatory measures, it raises concerns about fiscal discipline, spooking investors.
**World Today News:** We saw the Real claw back some losses later in the day. What triggered that reversal?
**Professor Teixeira:** The speeches by Senate President Rodrigo Pacheco and House Speaker Arthur Lira appear to have calmed the markets.Both leaders emphasized the importance of the fiscal adjustment measures presented by Minister Haddad.
crucially, they also indicated that the income tax exemption proposal, while desirable, is not a priority at this juncture. This reassurance, combined with the commitment to broader fiscal reforms, helped restore some confidence in the government’s economic plan.
**World Today News:** Looking forward, what are the key factors that will influence the value of the Real in the coming weeks and months?
**Professor Teixeira:** Several factors will be critical. First and foremost, the Lula administration needs to demonstrate a clear and convincing commitment to fiscal responsibility.This involves not only implementing the initial adjustment measures but also outlining a sustainable long-term fiscal strategy.
Second, the government must build consensus for its economic agenda, including the tax reform. This requires constructive dialog with Congress and engagement with various stakeholders.
global economic conditions will also play a role.
Factors like interest rate differentials between Brazil and other countries,commodity prices,and overall risk aversion in emerging markets will influence investor sentiment and,consequently,the Real’s exchange rate.
**World today News:** Thank you for your insights, Professor Teixeira.
**Professor Teixeira:** My pleasure.
