was successfully added to your cart.


The “optimal” exchange rate – cost effective v. effective?

By February 4, 2016PR Strategy
a bill of 100 brazilian reals

Valor Econômico recently reported the conclusions of a new marketing study by economists André Nassif, Carmen Feijó and Eliane Araújo, which argues that after at least ten years of strong appreciation, the Brazilian real’s nominal exchange rate with the dollar achieved “optimal” level in the first half of January ($4.02 to USD$1).

Optimal level in this case being defined as one that accelerates economic growth by reallocating funds efficiently to the most productive sectors.

The premise of the study is that, while extended periods of overvaluation diminish economic development, a small devaluation actually provides short-term stimulus. During a transition processes when the economy is extremely weakened, a devalued currency can create recovery opportunities but competitiveness is only reached through efficiency gains.

To my mind, while the idea that currency valuations can provide a corrective balance is appealing, this last qualifier on efficiency gains points to a more complicated truth in Brazil. Between 1990-2012 Labour Productivity accounted for 91% of growth in China, in Brazil the figure was just 40%. Put simply, efficiency has long been a challenge here.

But what does all this mean for international PR and marketing professionals?

Will the Brazil PR and marketing sector be subject the stimulation and productivity gains posited by the study?

Theoretically, the exchange rate means investing in Brazilian PR and marketing is more cost effective now than at any time in recent memory. But the simple truth is cost effective is not the same as effective.

While budgets set in dollars, pound or Euros may appear to stretch further with current rates, the priority is still what it always has been – strong strategy, strong service and strong execution. This is not always so easily found.

Unlike their international cousins, a more hierarchical business culture means that too many Brazilian brands and professionals still regard basic PR or editorial practices as either isolated and reactionary tactics. Proactive, issues-based or thought-leadership narrative is rare (though conspicuous when it is seen) and effective integration of channels has its own issues (more on that below).

So will the exchange rate change that? Short answer? Yes and No.

Brazilian agencies, and by extension the broader culture among Brazilian marketing professionals, are in a peculiar position as a result of strange law passed in 1960s. Law No.4.680/65 specifies that the pr agency that creates an ad must also buy the media, that gross media commission must be between 15-20 per cent and that further trade discounts should be paid to the agency and not revealed to the client.

Unsurprisingly, this incentivises larger agencies (Brazilian PR agencies as well as advertising agencies) to sell clients media space, and in house professionals are used to this way of thinking. Quite simply, the more inventory you buy, the more you make. Some Brazilian PR agencies will actually make the bulk of their revenues this way, while more traditional media tactics inevitably get deprioritised. It is hard habit to break, whatever side of the pr agency client divide you sit on.

However, sharp reductions in domestic PR budgets and different demands from international clients means that now, more than ever, senior management is putting pressure on teams to demonstrate return and effectiveness.

In that context, regardless of laws or exchange rates, necessity will always be the mother of invention.

Among younger brands and pr agencies in particular, innovation and more rigorous practice of core skills will surely follow.


If you would like to learn more about our PR Agency in Brazil and find out how Sherlock Communications can help you meet your objectives, do drop us a line at contact@sherlockcomms.com.

Leave a Reply

Sherlock Comms Logo

Are you looking for a PR Agency in Latin America?

Drop us an email and we'll get back to you as soon as possible!

Get in Touch!
%d bloggers like this: