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The year began with the beginning of the vaccination process in several countries – but with different speeds. Among the larger ones, the highlights are the UK and US, which should be reflected in a faster recovery of these economies in the short term. In the Eurozone, on the other hand, the process has been slower, as in Brazil.
In Brazil, the Central Bank signaled that it intends to start the Selic normalization process. In a hypothetical scenario in which the rate reaches a level between 4.0% and 5.0%, and in view of the pricing in the markets of stability in the interest rates of other emerging economies, the Brazilian currency would no longer be considered low yield – which, in our view, would tend to favor a scenario of exchange rate appreciation.
Brazilian gross debt ended 2020 at 89.3% – a big jump in the year, but well below what was estimated a few months ago. Even so, the level is high for an emerging economy and the fiscal situation remains the country’s greatest weakness.