Brazil to boost currency swap programme to fight volatility. Finance Minister Eduardo Guardia said on Friday May 18th that the shutdown of Treasury Direct bond trading is a way to “protect the individual investor.”
The statement was made following the discontinuation of talks on Friday, amid strong financial market volatility amid the devaluation of the real against the dollar. The operations were resumed at 15:57.
“The stoppage of the Treasury Direct is something we always do in the days of greater volatility. So, on days with more volatility, we stop the Direct Treasury negotiation, to protect the individual investor from the Treasury Direct, “Guard said in an interview with Globo TV.
The minister also commented on the movement of the dollar, which this week rose almost 4% in relation to the real. “First, it is very important to say that this movement of currency devaluation that we observe today is indeed an international movement. The dollar is appreciating against the major currencies, “Guardia said.
“This happened today in Brazil, it happened in South Africa, it happened in Mexico, in Chile, in Turkey, to a lesser extent until the appreciation of the dollar against the euro against the pound sterling. So it’s not a Brazilian issue, “added the minister.
Guardia ended by saying that the message to the financial market is “quiet”. “Brazil is on the right track, the Central Bank is working to avoid greater volatilities.”
Brazil X Argentina
The minister stressed that the situation of the Brazilian economy is “very different” from Argentina. Brazil has robust dollar reserves and the public sector is a “dollar lender”.
“International reserves are larger than the external liabilities of the Brazilian government, so we have a credible dollar position, which is very different from the Argentine position.”
Asked if the Central Bank should have acted in the foreign exchange market to contain the dollar’s high, the finance minister replied that the Central Bank’s performance has been “very adequate.” He emphasized that the achievement of structural reforms is that it will improve Brazil’s ability to “cross those periods” and “accelerate economic growth”.