Brazilian economy may be impacted by conflict

Since February 24, when Russian troops carried out a full-scale invasion of Ukraine, the global economy has been on high alert – even before its post-Covid-19 pandemic recovery. The conflict, which can already be considered the most serious in Europe since 1945, causes serious fluctuations in the price of a barrel of oil and natural gas.

In Brazil, in addition to the value of fossil fuels, the impacts should affect two other main pillars of the economy: the exchange rate, with the devaluation of the real; and the food sector, which is also pressured by the oil crisis. Helmuth Hofstatter, founder of the foreign trade startup Logcomex, comments on the importance of Russia in the area. “When we talk about foreign trade, Russia is undoubtedly one of the main Brazilian trading partners over the last few years. Only last year, the country was in tenth place among those that did most business with Brazil”, explains

Specialists explain the side effects that the conflict between the two nations can cause in the Brazilian economy.

Fall in fertilizer production

Among the main products imported from Russia are inputs for the production of fertilizers. According to Helmuth, this is cause for alarm. “The Russians import potassium chloride, ammonium and urea, which are important components for the production of fertilizers. In this way, if the conflict leads to a reduction in the supply of these supplies, the agribusiness sector may suffer from it”. The executive also adds that, in the face of difficulties, the market should seek alternatives to keep the wheel turning. “One of the effects of the confrontation between Russia and Ukraine may be in the supply of sunflower oil in the world. The Black Sea is responsible for 75% of the product’s exports. This could stimulate consumption of other vegetable oils, such as palm and soy, which are being traded at a record price of US$1,700 a ton in India.”

commodities

For Travelex Bank’s Head of Treasury, Marcos Weigt, in this scenario with global impacts, the situation in Brazil has a positive counterpoint because of Brazilian commodities. With the conflict, the items are going up a lot in price, mainly soy, corn, wheat and oil. “As a major exporter, Brazil favors this move, as global investors are seeing Brazilian assets as a hedge against inflation, in addition, our interest rate is quite high. So, at this moment of the conflict, the real should not depreciate so sharply, unless the war intensifies for other countries, a scenario that seems unlikely for now”, he highlights.

Brazil-Russia trade relationship

The trade relationship between Brazil and Russia increased by around 111% in 2021, according to Leonardo Baltieri, co-founder of Vixtra, a foreign trade fintech. According to data from the Ministry of Economy, in 2021, US$ 5.7 billion in products and raw materials were imported from the Russians, against US$ 2.7 billion in 2020. with Russia occupying the 6th position in the ranking of Brazilian imports”, ponders Baltieri. The impact of the conflict between Russia and Ukraine could still become a “snowball”, and the market reacted instantly by increasing, for example, the price of a barrel of oil and foodstuffs such as wheat and corn. “This will mainly affect the final consumer, and the supply crisis may be accentuated with this conflict in Eastern Europe”, completes the executive.

Meanwhile, in the conflict region… cryptocurrencies

While Russia suffers from economic sanctions and Ukrainians are prevented from making withdrawals in foreign currencies, in addition to restrictions on the local currency itself, cryptocurrencies, especially Bitcoin, are being used as alternatives for the population.

“Crypto assets and the decentralized economy, that is, without the control of government institutions, are alternatives to the traditional financial system and can help guarantee the well-being and, in this case, even the survival of citizens”, explains Safiri Felix, director of Products and Partnerships at Transfero, an international financial solutions company based on Blockchain technology.

It is the expert’s analysis of the situation of the Ukrainian population, for example. “Ukraine already has an interesting aspect, which is the fact that it is the fourth country in the world with the highest adoption of Bitcoin. So what we are seeing is that Ukrainians are looking for alternatives to flee or try to protect part of their wealth through cryptocurrencies. In practice, Bitcoin is helping ordinary people to preserve their savings in this moment of instability”, he concludes.

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