The US dollar opened higher against the Brazilian real on Tuesday, with investors weighing a proposal by economist André Lara Resende to reduce Brazil’s benchmark interest rate and watching the US midterm elections. At around 9:40 a.m., the dollar was up 0.88% at 5.494 reais, while it gained 0.07% against other currencies abroad and traded near stability.
Lara Resende, one of the architects of Brazil’s Real Plan, argues that the country’s fiscal challenge is driven by high interest costs rather than primary spending. He has proposed a new framework for fiscal and monetary policy that would include limiting the Selic rate, currently at 13.75% a year. The idea began circulating over the weekend and has raised concerns among analysts. Some economists aligned with the Workers’ Party oppose it, according to the report, and say that even public discussion of the government considering the proposal creates unnecessary uncertainty.
Brazil’s gross public debt stands at 82.9% of GDP, its highest level since 2021. A separate report cited in the original coverage estimated that balancing the accounts would require an adjustment of at least 250 billion reais over the next four years.
In the United States, voters are electing all 435 members of the House of Representatives and 35 of the Senate’s 100 seats. Republicans currently control both chambers. A Democratic victory in the House could lead to investigations into White House decisions, including visa grants to Flávio Bolsonaro and the possible involvement of US officials in his departure from Brazil after his defeat to Luiz Inácio Lula da Silva. The report also noted that congressional scrutiny could extend to President Donald Trump’s tariff policy and trade negotiations with foreign countries.
Brazilian markets have also been under pressure following Lula’s re-election. The Ibovespa, the country’s benchmark stock index, fell 0.74% to 167,921 points in the previous session, marking its fifth consecutive decline and its lowest level since August 19. The dollar had closed the previous Friday up 1.12% at 5.447 reais, its highest closing rate since December 30, 2025.
Investors are monitoring signals about the government’s fiscal policy and the composition of its economic team. The report also cited the recent outflow of foreign investment from Brazilian stocks as a source of pressure. On Wednesday, foreign investors recorded a net withdrawal of 2.8 billion reais from the exchange.
Domestic labor-market data offered a contrasting signal: Brazil’s unemployment rate was 5.2% in the quarter through September, the lowest for that period since the historical series began in 2012. The rate had been 5.4% in the three months through June. Economists quoted in the report said the figures were consistent with expectations and pointed to a gradual loss of momentum, while the labor market remained resilient.
Sources: Folha Mercado.