Interestingly, just as the international markets appear to be dumping dollars, many Brazilians have been doing just the opposite. My mother-in-law had to order dollars a week in advance; the strong real and uncertainty about inflation is prompting many Brazilians — ironically — to buy dollars.
Manufacturing Sector Ekes out a Margin while Government Gets Fatter
As a result of the strong real, Brazil’s manufacturing sector is getting hit hard on exports. The commercial deficit, which excludes construction, public utilities, and commodities, was R$30.4 billion in 2010, reports Estado de São Paulo. Luckily, the internal market is strong and high-tariff walls still serve to protect Brazilian industry from foreign competitors.
Yet just as the manufacturing and industrial sectors are feeling something of a squeeze, the government is posting record revenues on taxes. The Estado de São Paulo reported that government accounts are up 123 percent over the same period last year. Remember, of course, that last year was an election year, and President Luiz Inácio Lula da Silva was spending prodigiously to ensure his anointed successor’s victory. Last year the government went into the red, making this year’s surplus — relative to the same period last year — more comprehensible and, indeed, less impressive.