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Significance
Rising interest rates and commodity prices, and cheap stock market assets have been key factors in attracting capital. As a result, the real appreciated from around BRL5.7:USD1 in late December 2021 to nearly BRL5.01:USD1 on February 23, the day before the Russian invasion of Ukraine. However, the increase in capital inflows is subject to risks and likely to prove unsustainable.
Impacts
Growing capital inflows will make the real appreciate but the volatility of inflows could reverse this trend.
A potential reversal in capital inflows is likely to occur due primarily to international factors.
Domestic fragility will raise questions for investors, though public bonds and stock markets may remain attractive.
Keywords:
Brazil,
LA/C,
economy,
international relations,
politics,
capital flows,
exchange rate,
foreign investment,
growth,
monetary,
industry,
agriculture,
debt,
derivatives,
election,
oil,
policy,
soft commodities,
war,
bonds,
equities,
prices
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2022
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