Good news for Americans living in Brazil as the dollar grows stronger versus the real. In February 2013, the exchange rate was R$1.96 to US$1, an improvement for Brazil from November’s R$208 to US$1.
This week, however, the rate was much more favorable to the dollar, at R$2.45 to US$1, the lowest value of the real since February 2009. According to a Wall Street Journal article, the real likely has further to fall.
For those of us paid in US dollars, this was a welcome adjustment. Tom and I have seen the price of groceries and other necessities of life rise non-stop in the past year and a half, and have changed our habits accordingly, eating out less, buying few luxuries (food or drink, since we never buy products here such as clothing or shoes, etc., due to the exorbitant cost).
We’re sticking to our new habits for the time being, but are more inclined to go to dinner once in a while again, now that what used to cost us US$75 for two will be more like $60. Still not a bargain, but an improvement. (Restaurants here are ungodly expensive; if you want a cheap meal out, you eat at a padaria or lanchonette.)
The new exchange rate makes Brazil’s products more attractive for international buyers, making Brazil more competitive on the world market. The problem is, as the dollar strengthens and the real weakens, inflation will spike yet again, hurting Brazilians even more as the government tries to make up its deficit on the back of its hard-working populace.
I’m no economist, but I know that if prices go down even a bit, we’re more likely to buy more. If we can get dinner for US$50 for two of us, we’ll go out. If it’s US$75, we’re much more likely to eat at home. We might even spring for two dinners, totaling US$100, whereas we would hesitate to spend US$75 for one. Do the math: lower the prices and we’ll spend more.
In the meantime, we watch the exchange rate daily, wondering where the freefall will end, but cheering on our own behalf as we gain a few more cents to the dollar. Don’t judge me.