BTG Pactual raised its projections for the dollar at the end of 2021 and 2022, after currency movements in March due to the “substantial” deterioration of the domestic scenario and the more favorable scenario for the American economy, and warned that, in a scenario of greater public spending and strong increase in country risk, the price could end the year at R $ 6.40.
The value would be reached in a scenario where the additional fiscal cost to finance expenditures to combat the pandemic would be between R $ 200 billion and R $ 300 billion, which could take the five-year CDS to 550 basis points.
The Emergency PEC approved in March released funds of up to R $ 44 billion for the payment of the new round of emergency assistance this year. The CDS of Brazil was at 221 basis points this Thursday (8).
But in BTG’s base scenario, the dollar closes the year at R $ 5.40, above the R $ 5.20 previously forecast.
Among the local factors that dictated the worsening of sentiment and motivated the revision of the figures are the worsening of the pandemic, greater fiscal risks and perception of greater interventionism in the economy – this triggered by the change of command by Petrobras.
“The main negative risk for our foreign exchange scenario is a sign of further deterioration in the country’s public accounts,” the bank said in a note.
BTG cited as elements of worsening in the scenario a possible decree of the state of calamity and / or indiscriminate opening of extraordinary credits to defray expenses or programs similar to those of 2020. This “would increase the country risk and depreciate the domestic currency”, said the analysts .
Even with the new projections incorporating a worse scenario, they still point to a fall in the dollar until the end of the year, since the currency was around R $ 5.60 this Thursday. This downward prospect is explained by the bank based on the control of the pandemic in Brazil – which according to BTG will help to reduce the country risk -, from the increase in the Selic rate to 5.00% (the rate is currently 2.75% ) and higher commodity prices on the international market.
Professionals recalled, however, that the volatility of the real remains “very high” – around 25% in the first quarter of 2021, compared to close to 12% from 2011 to 2019 – because of the “adverse” domestic scenario and uncertainty “quite high”.
“Therefore, as long as the pandemic is not controlled and uncertainty remains high, it is possible that the exchange rate will reach even more depreciated levels before beginning the appreciation trajectory suggested by the fundamentals.”
For 2022, the expectation rose to R $ 5.60, from R $ 5.00. “The domestic scenario for 2022 has also changed substantially with the expectation of a presidential election that is perhaps more polarized, which amplified the scenario of greater fiscal risk in the coming year,” said the bank.