June 14, 2024

Brazil’s International Reserves Are Falling: Find Out Why!

2 min read
Brazil's International Reserves Are Falling: Find Out Why!

Brazil’s international reserves ended the month of September at $327.580 billion. This is the lowest level in 11 years, and represents a decrease of 34.624 billion US dollars compared to 2021. This is due to the closing of Brazil’s international reserves last year at 362.204 billion US dollars.

As we explained, this is the lowest level in over ten years, and more specifically since March 2011. So, to find out more on the topic, check below.

Understand the reason for the decline in international reserves

Thus, in March 2011 the level was 317.1 billion USD. It was the lowest level reached in this period so far. Regarding 2022, as of October 14, Brazil’s total international reserves amounted to 325.024 billion US dollars.

And why are reserves so low? The head of the Central Bank’s Statistics Department, Fernando Rocha, explained the situation during a press conference. Basically, the main reason for the reduction is due to increased global interest, especially in the United States.

That is because the US central bank, the Federal Reserve, has implemented a very strict monetary policy to combat inflation in the country. The procedure was applied in a similar way to what is happening with Cilic here in Brazil.

Thus, according to Rocha, this tougher stance by the US central bank has two main consequences for Brazil’s international reserves.

The first is the price variance, due to the market brand of the securities available in the stock of reserves. The second is parity, where the appreciation of the dollar lowers the prices of other currencies such as the riyal.

Finally, in 2022, all this ended up contributing to the reduction of Brazilian reserves. This year alone, there were $34.775 billion less. In addition, the interventions of the Central Bank in the foreign exchange market contributed negatively in this regard. To date, this factor has led to a decrease of $2.071 billion in our international reserves.

Photo: Anna_So / Shutterstock.com

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