Stronger Dollar & this and that

[Big Daddy]

The dollar has been steadily gaining, just as Tri had predicted. As the high season wanes, the dollar as of today will get you $R2.75, up from $R2.51 just a few weeks ago. The cost of meeting your favorite sauna boy is now $18.18 as compared to $19.92. OK, this not not enough to make or break a trip to Brasil, but every little bit helps. When you add up your total spending in Brasil, then it gets a bit more impressive. If I spend, for example, $R11000 while I am in Rio for a month, that translates to $4000 at the current rate. A few weeks ago, it would have cost $4382.

 

I have made my reservations at the Atlantico through Carlo. Out of curiosity, I asked him what the rates at the Marina All Suites was. The basic suite is $210 US a night. We are very comfortable at the Atlantico, so no need to change.

 

Wan Hallen surprised me by telling me that he wants to apply to become a Military Policeman or a Federal Policeman. I think they are the samething. I am very proud of him, but of course worry. I look forward to his calls each day. On Sunday, I was in Tucson with my mother and he called while I was with her. He talked to her for a few minutes. She has some knowledge of Spanish and they were able to exchange pleasantries. Turn about is fair play, as he often hands the phone to his mother so that I can talk to her. Decided to tell the family about Wan Hallen so that they would understand my seeming obcession with all things Brasilian, and of course my frequent trips. If I do not call for a period of time, when I do call they say oh we thought you were in Brasil.

 

I am flying to Rio, arriving on the 12th of May. Wan Hallen's flight arrives at GIG at 10 AM and I arrive at 10:55. He will be waiting for me as I exit customs. I was able to snag Business, but returning in coach. I found out that if I stay one more day, I can also return Business. I then discovered that I am 2500 miles short of being able to upgrade. Hopefully I will be able to get the additional miles before I lose the seat.

 

It appears that there will be quite a few gringos in Rio during the month of May. Looking forward to seeing many of you again, and to meeting new friends.

[trilingual]

RE: Stronger Dollar & this and that

 

Brazil, for confusing historical reasons, seems to have a plethora of police forces. The military police (PM) and the federal police (PF) are NOT the same thing. The PM is the basic on-the-street force; they're the uniformed guys you see patrolling everywhere, although in some cities there are also auxiliary forces, like Rio's Guarda Municipal. The PF is somewhat equivalent to the American F.B.I., in that it investigates violations of federal laws, but it has a number of other functions. For example, they also are responsible for control of immigration; the people who check your passport at the airport are PF officials. There's also a Civil Police whose function I have yet to figure out! If Ernani is reading this, maybe he can explain what they do! If I recall, there's also a Judicial Police.

 

The PF is more prestigious and pays much better than the PM, but the PM can be a stepping-stone to the PF. A number of the guys you meet at the saunas or who escort are in the police forces, or have been, or aspire to be in them.

[menrus]

Been around long enough to appreciate all currencies move in cycles.

Noted some here predict the total collapse of the US dollar never to

regain in value. No comment, but I will continue to learn from history.

[trilingual]

I'm with you on currency cycles. I'm somewhat mystified by the current one, to be honest. The U.S. economy clearly is having problems that can weaken the dollar, but I fail to understand what's driving the strength of the euro, when unemployment is rampant, business is sluggish, and the biggest players in the European economy are busting the deficit ceilings established as part of creating the euro. Given that the economies on both sides of the Atlantic are problematic, it would seem that the dollar and euro should be closer to par, instead of the euro being highly overvalued against the dollar.

 

Similarly, the fluctuations of the real in the past year are somewhat mystifying. Nevertheless, after reaching a low point against the real during the peak tourist season, the dollar is once again strengthening against the real, albeit slowly. That's been a predictable pattern for many years. We'll just have to see if it continues to hold true at a time that the U.S. economy is shaky while the Brazilian economy appears to be taking off for a new, and possibly sustainable, growth cycle.

[Mouth]

Dear Tri,

 

I just read about the growing concern over the U.S. dollar which has lost more than 35% of its value against the Euro since 2003. This week's Newsweek has a cover story on it. I can't begin to understand all the various complications between deficit spending, the U.S.'s love affair with consumerism (that we can blame on the last two Presidents), exports, and the growing U.S. debt owned by such countries as Japan and China. Apparently this devaluation, which nobody can quite understand, but which our President tell us not to be concerned about, is very worrisome. As Newsweek says, for the past 15 years the dollar has been the dominating currency in the world. We're also told that should the Japanese, Chinese and other foreign investors owning U.S. debt demand payment (which is "unlikely" to happen), the world is in for a large and sustained financial collapse. U.S. citizens owe too much, and save very little. The declining U.S. dollar is very concerning.

 

If the Brazilian economy does begin to take off, U.S. tourism will decline like it has in Europe. I've just returned where store owners, restauants and others dependent on U.S. tourist dollars are hurting badly. Tourism in Rio has been a mainstay of the economy there. Surely improved business in Brazil will have a beneficial effect on the country, but what happens to the tourist industry in the meantime.

 

Mouth

[trilingual]

I think it will be many years, if ever, before the real is ever worth MORE than the dollar, which would cut off tourism. More likely, I think, is that the real will strengthen against the dollar, but not to the point that Brazil would be expensive by U.S. standards. Even at 2 reals to the dollar (which is not in anyone's cards at this point) Brazil would be a cheap place to visit. Not as cheap as when the real was 3 to the dollar, as it was last year, but still cheap. Today the real is at R$2.71 to the dollar.

[xchris]

Poor Strong EURO

 

In my opinion we are not facing a normal cycle, but a new hystory, as the world market is becoming larger than we were accostumed to. With new players, new weights willing to stay on the same balance.

 

Brazil itself in entering the game with no knowledge about the possible problems created by a rampant market which will definitely modify every previous habit. They will reach the climax too quickly, as everything seem to happen on these days. How long will they last?

 

Euro evaluation has no reason. A weak dollar at least help export. A strong Euro not ever this. Maybe a sad bankers game.

 

CHRIS (Italy)

[Guest msclonly]

Not understandable

 

Why does anyone think that they can understand what is going on with the world´s money system, when Greenspan´s doublespeak is not understood by anyone, even when they leave bradcrumbs from where he started and do not not where he went!

 

It can happen faster then it states above. Think of poor thailand and Brazil and Argentinas´fall.

Yes the US$ has fallen 50% in the last 1 and half years re the Euro, and it seems the debate is íf it will fall!

 

Are you hedged against the $US devaluation, even though the banks are doing everything they can to keep Gold suppressed. Probably not, unless you believe it can happen.

Of course, they have NO control over Uranium supplies, and that is where the action has been phenomenal in the last two years.

 

 

:+ :9

[trilingual]

RE: Not understandable

 

Nobody TRULY can understand all the dynamics of the currency markets. All they can do is make educated guesses and hope they bet right!

 

Unquestionably, currencies have collapsed overnight, but usually in countries whose fundamentals were deeply flawed. The U.S. is certainly on a heedless road to ruin under the present administration, but the sheer size of the U.S. economy, and it's accumulated wealth, make it unlikely that the dollar will just collapse into worthlessness. The U.S. has big problems right now, but not all parts of its economy are in trouble, and if U.S. interest rates continue to rise the dollar will again become a more attractive place for foreign investors to park their funds. That will increase the strength of the dollar.

 

The value of the euro really is a mystery to me, considering all the factors mentioned in my earlier post, plus the inevitable expenses that will be incurred as the new Eastern members of the EU are brought up to Western European standards. Unemployment is a problem virtually everywhere in Europe, negative population growth is a looming threat in the wealthiest countries, people are squeezed because of euro-induced inflation (prices were jacked up outrageously in many cases when the euro was introduced, without accompanying increases in salaries and incomes), growth is low, etc., etc. Europe is still wealthy, but not as wealthy overall as the U.S., nor as productive. None of these factors justify a strong euro.

 

Brazil (and to a lesser extent Argentina) are recovering after currency collapses. Argentina's was worse, and badly handled compared to Brazil's. Nevertheless, in both countries the economies are growing, foreign investment has returned, and at least in Brazil there are indications that the resurgence is broad-based and diversified, and may be long-lasting. If that turns out to be the case, it stands to reason that the real will strengthen from its immediate post-crash position. On the other hand, both countries will have fundamental problems of poverty, social inequality, mismanagement and corruption for years to come, and that will keep the local currencies from being worth as much as the dollar or euro. It's also against the interests of both countries for their currencies to gain too much in value, as their recoveries depend very much on exports which cannot become too expensive on the world market and still be competitive. To protect their burgeoning export and tourist industries, both countries want their currencies to fluctuate in a range of about 2.80 to 3.00 to the dollar. Argentina's peso is within that range. Brazil's real has been as high as 2.58 recently and closed Friday at 2.71. A big reason for the difference is that Brazil has sky-high interest rates (among the world's highest) which attracts foreign currency for deposit in Brazilian accounts. That creates a demand for the real. Interest rates are high in Argentina, too, but not as high as in Brazil, and Argentina is still viewed by most investors as being less stable and secure than Brazil, so it isn't attracting the same kind of foreign deposits. In Brazil, inflation is fairly well controlled, and interest rates may start to decline, which will make the real weaker, at least in the short term, and it may return to the 2.80 - 3.00 range. In the long run, if the recoveries prove durable and inflation remains under control, both currencies will get stronger, but perhaps in the range of 2.00 to 2.50 to the dollar, which will still make both countries cheap in U.S. terms.

[Guest dreynsol]

RE: Not understandable

 

I would agree with Tri that interest rates have a great deal to do with attracting foreign inflow of capital and boosting currency rates. Think of the world economies as a row of banks down the street, some offering six percent, others offering sixteen percent.

 

The differentiating qualities are the amount of risk involved. You probably wouldn’t want to invest in junk bonds even if the rate was sixteen percent. But, surprisingly the more conservative approach of Lula and the Brazilian government has been successful in lowering the actual and perceived risk in investing in Brazil. As interest rates rise in the US, as they are already, the Dollar will rise accordingly.

 

Now, if they could only understand in Brazil that relaxing their visa restrictions would bring a boat-load of entrepreneurs to Brazil that would improve their economy and not take away jobs from Brazilians – actually add jobs.

 

As far as the Dollar vs. the Euro, I think a lot of it is artificially induced. With our government (I won’t mention his name) talking about the looming collapse of Social Security along with Greenspan following in step, I think a lot of the currency pricing is based on global perception, rather than reality.

 

The long term of prospects of China and Brazil’s economies are excellent due to their tremendous reserves of natural resources, and in China’s case cheap labor. Brazil is still suffering from a lack of infrastructure that would allow it to more efficiently transport product to ports for exportation, and unfortunately, that won't change overnight.

 

Hope I haven’t bored you! :-) But that’s my economical two cents worth! Please correct me if I’m wrong. :-)

 

- Drey

[Guest msclonly]

Book smarts vs Steet smarts

 

I didn´t realize, there were so many economics on this board, but their vageries aaare all telling.

 

First, NO one said the US$ would become worthless!

But it is WORTH LESS now, then it was a year or two ago.

And we have to deal with what is in the PRESENT, not what might be by anyone´s imagination or rationalization without substanitiation.

Neither are the Thai Baht, Brazilian Real and Argentinian Peso, worthless, but they are WORTH LESS! And that is what counts.

I doubt if the majority of each country wonders as to why that is, when they go to buy food and clothes, etc.

 

It became eveident, that most of the scenerio´s foretelling the future outcome to many situations, especially political do NOT transpire as outlined on these strings. More often they are rash criticisms of th powers that be, especially if of a different political persuasion. It is like another opportunity to bash, repeaatedly without substance. More fanciful, then enlighting!

 

}(

[trilingual]

RE: Brazilian Visa Requirements

 

Brazil is in the process of changing its immigration laws, and permanent residence visas are expected to become easier to get. Tourist visas are a different story, as there is still a strong current in Brazil that supports its strict reciprocity policy (i.e., if you requre a visa and/or fees for Brazilian tourists to visit your country, we'll impose identical requirements on your citizens visiting Brazil).

 

As it is, it's relatively uncomplicated to get a visa as a retiree (singles have to demonstrate retirement income of at least US$2000/mo) and Brazil has recently lowered the requirements for an investor's visa to US$50,000 and a commitment to create at least ten jobs for Brazilian citizens within two years of obtaining the visa (the last requirement is seen as unenforceable by many here).

 

The comprehensive immigration law reform may make obtaining both kinds of visas even easier. The main impediment to immigration to Brazil is Brazilian tax law, which taxes the worldwide income of Brazilian residents at uncomfortably high rates (at least as compared to U.S. tax rates). For Americans, there is no relief because there is no tax treaty between Brazil and the U.S. Canadians and Europeans do benefit from tax treaties with Brazil, and they should get copies of the treaties from the revenue agencies in their home countries to see which specific provisions benefit them. As examples, Canadians (if I read the treaty correctly) would not have to pay taxes in Brazil on public pensions or Canadian social security income. Italians would not have to pay Brazilian taxes on public pensions or on rental income from properties located in Italy.

 

With those tax issues in mind, think before you leap!!!