The full insanity of Brazil’s economy right now can be easy to miss amid all the wire stories about SELIC rate hikes and inflation targets, so The Economist has done us all a favor.
In clear language, the magazine explains why Brazilian currency is continuing to surge against the dollar (1.58 reals per dollar and counting); why the overvauled currency hurts Brazilian manufacturers; and how all this relates to the Brazilian government’s losing battle against inflation, along with the central bank’s decision to hike Brazil’s baseline interest rate to 12 percent—the highest among all the world’s large economies. Interest rates on U.S. Treasury bills, by contrast, are less than 1 percent.
Basically, all this means Brazil’s getting way more expensive for regular Brazilians, Brazilian goods are becoming unaffordable for foreigners, all of this is bad for the long-term health of the economy. And it looks like none of the forces causing the problem can be stopped anytime soon.