Growing Economy Lifts Brazil's Real

Global Finance, Oct 2004

The Brazilian currency is getting a rise from a recovery in the nation's economy, which grew at the fastest rate in eight years in the second quarter of 2004.

The real rose by 5% against the US dollar in July and August combined, bringing its gains to 21% since President Luiz Inacio LuIa da Suva took office in January 2003.

Brazil's gross domestic product grew 5.7% in the second quarter from the same period a year earlier, following a 2.7% expansion in the first quarter, signaling an end to the country's recession.

A series of interest-rate cuts by the central bank has helped to stimulate a surge in consumer spending.

GOL Linhas Aéreas Inteligentes, Brazil's low-fare airline, raised its guidance for full-year 2004 earnings on August 31, based on the improved foreign exchange rate environment.

"We expect the stronger Brazilian currency to positively impact our dollar-denominated and dollar-linked expenses in the third and fourth quarters and to improve overall earnings for the full year 2004," according to the company.

About half of GOLs operating expenses are either denominated in US dollars, such as aircraft-leasing expenses, or are dollar-linked, such as jet fuel.