BRL needs to depreciate to achieve competitiveness

Given the rigidities in the labor market, external competitiveness requires a sufficient enough BRL depreciation. 

While the recent depreciation is significant, it is not yet sufficient to make Brazilian exports (manufacturing in particular) competitive in a world where trade growth has declined considerably. While BRL depreciated by 169% between 1998 and 2003, it has lost only 46% since 2013.

At the same time, the nominal and real trade weighted indices have depreciated by only 18% and 11% respectively since 2013 compared with a depreciation of 58% and 41% during 1998-2003. Therefore, Societe Generale argues, BRL must depreciate further to improve export competitiveness.