A recent Reuters survey suggests that Brazil’s real is anticipated to maintain a relatively stable trading pattern over the coming months, albeit constrained by worries tied to the nation’s external accounts. Despite these concerns, the real has demonstrated resilience, bolstered by elevated domestic interest rates and a softer U.S. dollar on the global stage. However, lingering doubts among investors regarding Brazil’s capacity to sustain its current account funding have compounded anxieties about fiscal deficits and potential solutions. This outlook contrasts with other Latin American currencies, such as the Mexican peso and Argentine peso, which face distinct challenges.
In the near term, Brazil’s economic landscape appears promising. The median projection from 27 foreign exchange analysts surveyed between May 30 and June 3 indicates that within a year, the real may hover around its present value of 5.64 per dollar, depreciating slightly to 5.75—a modest decline of 1.9%. This forecast aligns with recent trends showing the currency strengthening compared to earlier predictions made in January when it was recovering from difficulties at the end of 2024. Analysts attribute this stability partly to favorable interest rate differentials and optimistic prospects for trade negotiations between major global powers.
Nonetheless, several factors could impede further gains for the real. Economists at Itau Unibanco warn that any potential agreements in international trade might reinforce "American exceptionalism," thereby limiting opportunities for emerging markets like Brazil. Additionally, domestic fiscal uncertainties paired with unfavorable external account dynamics pose significant hurdles. Exporters also face specific challenges, including reduced poultry exports due to avian influenza outbreaks and diminished Chinese demand for soybeans.
When asked about risks affecting their forecasts for the real over the next year, opinions among respondents diverged. Six out of sixteen leaned toward a stronger currency, while five anticipated weakening and another five maintained neutral stances. In comparison, expectations for the Mexican peso varied similarly but leaned slightly more positive, with five of twelve expecting appreciation against four foreseeing depreciation and three holding neutral views.
Looking ahead, regional currencies present contrasting trajectories. The Mexican peso is projected to depreciate by approximately 6% over twelve months, reaching 20.46 per U.S. dollar from its current level of 19.23. Meanwhile, Argentina’s peso is expected to stabilize just beneath the upper boundary of its official adjustable trading band, set at 1,400 plus a monthly 1% increase initiated in April. Notably, despite Argentina loosening capital controls earlier this year, its currency has fared better than anticipated, losing only 13% so far in 2025.
Brazil's currency performance underscores a broader trend where supportive macroeconomic policies and external conditions can mitigate short-term volatility. Nevertheless, addressing structural issues remains critical for ensuring sustained strength across Latin America's financial landscapes amidst evolving global economic scenarios.