The Brazilian real posted another record low against the US dollar midweek as the nation is beginning to see a huge spike in confirmed coronavirus cases. The real, which has been the worst-performing emerging market currency this year, is coming under pressure from weak economic data, expansive fiscal and monetary policy, and the global pandemic.
President Jair Bolsonaro has largely shied away from shutting down the country, fearing that job losses and economic declines would be more damaging to Brazil than COVID-19. Despite his condemnation, state and municipal governments have been instituting lockdowns in select locations as the nation’s death toll is the largest in Latin America.
Bolsonaro has continually urged the public to ignore regional and local public health initiatives, but medical professionals are pleading with the public to adhere to the strict lockdown measures and stay-at-home orders. Health authorities are trying to prevent the health care system from being swamped with patients, and doctors are reportedly being forced to choose between who lives and dies, which they say could create social unrest nationwide.
To date, Brazil has more than 181,000 confirmed coronavirus cases and about 12,600 deaths. The data highlight a considerable upward trend since the end of April.
The commodities-rich nation will now have to choose between maintaining the status quo or suspending operations to prevent a greater spread of COVID-19. Investors are preparing for supply disruptions, while some farmers are beginning to speed up their practices to ensure they meet deliveries later this month.
Much of South America has mirrored the policies as the rest of the world, imposing travel restrictions that have affected shipments and transportation. And this is affecting farmers who have been given stellar growing conditions, especially in the coffee sector.
On the data front, March retail sales fell 2.5%, down from the 0.5% gain in February. The inflation rate tumbled 0.31% last month. Automobile production cratered 99% last month, while new car registrations plummeted 67.7%. Industrial production contracted 9.7% in March, and the IHS Markit manufacturing purchasing managers’ index (PMI) plunged to 36.0 – anything below 50 indicates a contraction.
The USD/BRL currency pair surged 0.72% to 5.9285, from an opening of 5.8860, at 18:24 GMT on Wednesday. The EUR/BRL advanced 0.44% to 6.4132, from an opening of 6.3854.