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BRAZIL ECONOMICS - Report 25 Feb 2026 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The Brazilian real continued its appreciation at the beginning of the year, strengthening 5.6% through the first half of February. The dollar fell below BRL 5.20/USD, reaching its lowest level since mid-2024. We believe, however, that this appreciation of the real is not grounded in an improvement in domestic economic fundamentals, but rather in changes in the international political-economic environment that have primarily affected the U.S. dollar. Evidence of this can be seen in the dollar’s own depreciation against a basket of currencies, which has declined by 1.40% year-to-date; in the strong appreciation of metals such as gold and silver; and in the similar appreciation of other currencies from economies comparable to Brazil. Our currency decomposition exercise points to global dollar weakness as one of the main factors driving the real’s appreciation.

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