Summary Brazil is experiencing an unprecedented increase in the value of its currency partly because of exchange rate over evaluation. Over the past two years, the Brazilian currency gained 40% against the dollar producing negative long-term effects on the economy (Lyons). The affordability of Brazilian land, labor and rent rates coupled with the expensive currency attracted investors into the country. In addition, the Brazilian economic growth rate stood at 7.5% as at the year 2010 attracting foreign investments into the country. To curb the high inflation rate of 6.4%, the central bank of Brazil undertook to raise the interest rates. However, the high interest rate made Brazil an investment haven, drawing hordes of investors from rich countries with low interest rates such as USA. This resulted into appreciation of the Brazilian currency, which had implications on Brazilian exports and the local economy. The Brazilian economy depends mostly on exports and the over evaluation of its currency has many implications on the country’s economic growth. The strong value of Brazilian currency affects local manufacturing and processing industries as it leads to an increase in the cost of production. This has made Brazilian made products expensive as compared to similar products produced in other countries. Another implication of the overvalued currency lies on the salaries of the civil servants. The productivity of the Brazilian economy is low compared to that of rich nations such as USA. However, Brazilian workers earn more, in dollars, compared to workers from rich industrialized countries because of the overvalued currency. The overvalued currency also affected the business investments in Brazil. The cost of doing business in Brazil rivaled that of developed nations despite unfavorable business environment in Brazil characterized by poor infrastructure, government policies and insecurity. The overvalued currency also has affected the Brazil’s poor, where their meager income cannot match the high cost of living. The expensive currency means that the food, land and transportation costs remain high and unaffordable to the poor. The expensive currency has also affected tourism as the traveling and accommodation expenses in hotels and resorts have increased. Critical Evaluation In addition to the over valuation of the Brazilian currency, capital flows into the Brazilian economy from other industrialized countries has had a major impact on the economy. The strict control of the exchange rate was meant to stimulate economic recovery after years of stagnation characterized by high inflation rates. According to the Lyons article, the availability of land, cheap labor and rent rates when evaluated in dollar terms, encouraged foreign investments and tourists partly contributing to the increase in the value of the Brazilian currency. The exchange controls against the dollar have been responsible for the economic challenges experienced in Brazil. It contributed to the rise in the value of the local currency when compared against the dollar. According to the article, the public sector employees have been the worst hit by the expensive currency (Lyons). The exchange controls intended to insulate the domestic economy from international effects and allow the local curre