The country’s currency has in fact weakened even more of late, plunging to its lowest level since late 2002 after Standard & Poor’s Financial Services downgraded Brazil’s credit rating to junk status.
But for Vale, whose revenues are accrued in US dollars, the depreciation against the US currency helps the miner to reduce its capital expenditure budget and cut costs, which are mainly accrued in the Real. Fertiliser sales aside, Vale is an export-focused company.
“The weakness of the exchange rate obviously helps, although when you look worldwide, all the exchange rates of commodity-producing countries are depreciating against the US dollar. It is also true that the Brazilian Real has depreciated more,” Vale cfo Luciano Siani Pires said.
“So on a relative basis, we are improving our competitiveness against the industry because of that fact, which is exogenous but is still a fact,” he told Metal Bulletin...