Dec. 7 (Bloomberg) -- ... A positive growth outlook, vast natural resources, developed capital markets and attractive interest rates have induced foreign capital to flood into Brazil. That, in turn, has caused the local currency to soar... Overvalued exchange rates will pose a challenge for many emerging economies. That’s inevitable when governments worldwide continue to pump liquidity into capital markets and investors who face near-zero interest rates at home seek higher returns elsewhere.
Nowhere is this more evident than Brazil. Latin America’s largest economy received a record $59 billion in foreign direct, equity and fixed-income investments during the first 10 months of this year, according to the nation’s central bank. The inflows help explain why the Brazilian real has gained about 34 percent against the U.S. dollar this year, more than all major currencies Bloomberg tracks....
Critics of a strong real once were limited to the directors of Brazil’s large exporters, especially those hurt by Chinese competitors. Now their concern has spread to the finance ministry, the national development bank, the central bank and the headquarters of the candidates for next year’s presidential election...--
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