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Strong U.S. dollar is opening doors for tourists

Janet Nguyen Sep 10, 2015

Brazil’s currency, the real, is at its weakest value against the American dollar in more than a decade, signaling the dollar’s growing power in the global economy. And now the strong dollar has the potential to open up Brazil and other countries to U.S. travelers.

On Wednesday, Standard & Poor’s downgrading of Brazil’s credit rating to junk status sent the value of the real to a low not seen since 2002. On Thursday, the rate for the Brazilian real per U.S. dollar dipped to R$ 3.9068, its historical low hitting R$ 3.9790 in October 2002, according to the Financial Times.    

 A couple of the factors that may have led to the real’s depreciation include sagging commodity markets and corruption scandals swirling around in the South American country, says Andrew Karolyi, a professor of finance at the Johnson School of Management at Cornell.   

But despite the real’s reflection of a suffering economy, certain industries may see an advantage to the real’s dip.  

After the 2014 World Cup in Brazil, there were concerns that the hospitality industry would slump.

“And the irony of ironies is that the weakening real has made it relatively more attractive for those tourists to think about coming back on the margin,” Karolyi says.   

With the country’s currency situation, the companies involved in Brazil’s hospitality industry may start “doubling down” by offering services geared toward the high-end traveler, he adds.

Karolyi says he thinks U.S. touring companies are seeing opportunities to present attractive terms to travelers in countries where the U.S. dollar is strong relative to their currencies.

So will the dollar’s positive trajectory continue?

“While things may be relatively attractive for U.S. households to travel overseas and take advantage of the strong dollar, if you’re planning too far ahead, I could see things turning in the wrong direction just as easily,” Karolyi says. “One thing I will predict is that we are in an elevated state of uncertainty.”

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