The energy that comes from oil

BRAZIL ECONOMICS - Report 22 Apr 2026 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The real continues on an appreciation trajectory, with performance that stands out relative to developed and emerging peers. The movement reflects higher oil prices, which tend to improve the terms of trade and the country’s external position, combined with strong inflows of foreign capital into equities and fixed income, the latter attracted by the wide interest rate differential. Our real exchange rate model indicates a “fair value” around BRL 5.30/USD, suggesting that the real is more appreciated than long-term fundamentals justify. Signs of easing in the conflict with Iran may relieve part of the upward pressure on oil, but prices are likely to remain above pre-war levels for some time. On the domestic front, the proximity of elections, the government’s propensity to expand spending and rising inflation keep uncertainties elevated.

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