The question every investor asks: "The dollar already climbed from R$ 4 to R$ 5.20. Is it too late to buy now?" Short answer: buying dollars at R$ 5.20 is not betting they will hit R$ 6 tomorrow — it is buying insurance against a fiscal scenario that, in the reading of a former central bank insider, has not fully played out yet. Brazil's Dilma II crisis pushed the exchange rate from R$ 2.50 to R$ 4.20 in just over a year. Investors who bought "late," at R$ 3.50, still captured half the move. What matters is not the perfect entry point — it is whether the underlying thesis still holds. And it does.
Who is Kanczuk — and why this warning carries weight
Fabio Kanczuk is not an analyst chasing clicks. He served as Director of Economic Policy at the Banco Central do Brasil (Brazil's central bank), holds a doctorate in economics, and has experience in asset management. He is the type of technical voice that tends to choose words carefully — which is exactly why the tone of his recent interview stood out. His message to InfoMoney was blunt: "the arithmetic is easy." Brazil's fiscal position, in his accounting, is unsustainable, with the government continuing to raise spending while denying the severity of the problem.
His projection is uncomfortable: when markets stop financing Brazil on current terms, the country will face "a dollar surge, an interest rate surge, and an economy that sinks" — the exact playbook of Dilma Rousseff's second term (2015-16). He calls this a "forced adjustment": not the kind a government chooses, but the kind imposed by markets when the numbers no longer work. The difference between the two is the difference between applying the brakes and hitting the wall.
The mechanism: how a government loses market financing
"Forced adjustment" sounds abstract until you trace the actual gears. No government collapses overnight — it gets strangled by a self-reinforcing cycle:
The critical moment is step 4. Once interest expense starts growing faster than any spending cut can offset, the government enters a feedloop: it issues debt to pay interest, which increases the debt stock, which raises the yield creditors demand, which raises the interest bill further. The exchange rate is the fastest thermometer of this process. Before long-term yields blow out in Treasury auctions, capital starts to exit — and that capital flight is the dollar surge. The currency does not spike "for no reason"; it prices fiscal distrust first. The article why Brazil pays the world's highest interest rate walks through the debt mechanics in detail.
The Dilma II lesson: the actual numbers
Kanczuk did not choose the Dilma II analogy at random. It is the last time Brazil ran this script to completion — and the figures explain why nobody wants a replay. Between 2014 and 2016, the combination of fiscal deterioration, loss of investment-grade status, and political paralysis produced:
The detail that cuts deep: the peak Selic rate during the Dilma II crisis — 14.25% — is exactly where Brazil's benchmark rate sits today. The difference is that back then, 14.25% was the point where the crisis broke. Today, it is the starting point. Investors who held dollars in 2014 shielded their wealth from a nearly 70% devaluation in real terms. Those fully in Brazilian equities or fixed income without currency protection watched the international purchasing power of their savings shrink dramatically.
Brazil in 2026 vs. Dilma II: what is the same, what changed
The analogy is not perfect — and recognising the differences is what separates analysis from panic. Here is the comparison:
| Indicator / factor | Dilma II (2015-16) | Brazil (2026) |
|---|---|---|
| Fiscal trajectory | Widening deficit, rising debt | Persistent deficit, rising debt |
| Selic (benchmark rate) | 14.25% (crisis peak) | 14.25% (starting point) |
| Projected inflation (IPCA) | 10.67% (2015 actual) | above 5% (2026-27 forecast) |
| Dollar (BRL/USD) | R$ 2.50 to R$ 4.20 | already at R$ 5.20 |
| Central bank independence | BC subordinated to government | Legally independent since 2021 |
| International reserves | Robust (~US$ 360 bn) | Robust — meaningful FX buffer |
| Political trigger | Impeachment, paralysis | 2026 election cycle as barometer |
What has improved: the Banco Central has been legally independent since 2021, which strengthens the monetary anchor; reserves remain robust and can cushion sharp currency moves. What has not changed — the core of Kanczuk's argument — is the fiscal arithmetic: spending rising, debt climbing, no credible sign of voluntary adjustment. The currency shock of 2015-16 did not come from a weak central bank; it came from fiscal deterioration. That vector is intact. For context on why voluntary adjustment keeps being deferred, see Spending cuts: the adjustment nobody wants to make.
Why CDI and the dollar are the safe haven right now
Kanczuk's recommendation is more nuanced than "buy dollars." It starts with a number most investors skip: the real interest rate.
The real rate math: Selic at 14.25% minus projected inflation above 5% = real interest rate above 9% per year. That is among the highest real rates anywhere in the world. For investors, the CDI (Brazil's overnight interbank rate, which closely tracks the Selic) delivers one of the best inflation-adjusted returns on the planet — with minimal credit risk and daily liquidity.
This ultra-high real rate has two faces. For the public debt, it is poison: every point of real rate above GDP growth causes the debt-to-GDP ratio to spiral higher — the classic arithmetic of sovereign debt dynamics when the primary surplus does not compensate. For the individual investor, the same number is a rare opportunity: while electoral uncertainty lingers, the CDI pays you to wait. That is Kanczuk's logic — stay in CDI while the outcome is undefined, because the elevated Selic rewards patience well.
The dollar functions as the other leg of the hedge. If Kanczuk's scenario materialises, CDI preserves nominal value and dollars preserve the international purchasing power of your wealth. The elections serve as a portfolio barometer: in his read, a Lula re-election reinforces the case for holding dollars; a fiscally credible alternative candidate would open the door to a stock market rally. Either way, holding dollars + CDI means you are positioned for both electoral outcomes.
How individual investors get dollar exposure in Brazil
"Buying dollars" does not mean going to a currency exchange and storing cash in a safe — that is the most expensive and unproductive approach. Brazilian retail investors have liquid, low-cost vehicles available directly through their brokerage:
| Vehicle | How it works | Key consideration |
|---|---|---|
| Global equity ETFs | B3-listed funds tracking dollar-denominated indices (e.g., S&P 500). Currency + equity exposure. | Carries equity risk alongside FX — not "pure" dollar exposure. |
| BDRs | Brazilian depositary receipts of foreign stocks, traded on B3. Rise with both the dollar and the underlying company. | Mixes currency risk with individual company risk. |
| Currency funds (fundos cambiais) | Funds that directly track dollar fluctuations. Pure FX exposure. | Management fees apply; check total cost and tracking error. |
| FX-linked government bonds | Tesouro Direto bonds indexed to exchange rate variation — sovereign FX exposure. | Availability and liquidity vary; check current offerings. |
| Gold ETF (e.g., GOLD11) | Gold is priced in dollars — rises with both FX and global risk aversion. | Dual exposure: currency + gold price dynamics. |
The right vehicle depends on the objective. Investors who want pure FX hedging tend toward currency funds or FX-linked government bonds. Those comfortable adding international equity exposure use ETFs and BDRs. Gold via GOLD11 is a hybrid: it protects against BRL depreciation and against global risk simultaneously. The key insight is that every vehicle bundles in risks beyond the exchange rate — there is no "buying dollars" without choosing what rides along.
How this connects to our portfolio positioning
Kanczuk's thesis is not a surprise for readers of this site — it reinforces the positioning we already hold. In the current allocation, the dollar represents 25% of the portfolio with an optimistic outlook, and cash/CDI stands at 15%, also optimistic. Together, 40% of assets are in exactly the two safe havens the former central bank director identifies. We carry IBOV at just 10% with a pessimistic view and zero in S&P 500 — consistent with the read that domestic fiscal risk and stretched overseas valuations both call for caution. The full rationale is in the May 2026 portfolio rebalancing.
A fair counterpoint: Kanczuk's alert is a risk scenario, not a certainty. Brazil has paths out of the fiscal spiral — they exist and are mapped in Does Brazil's debt have a solution?. The problem is that the least painful path requires political decisions that are not being made, and the easy path — printing money — is a disguised default, dissected in The inflationary exit: the default that does not say its name. Currency exposure is what lets you navigate any of these outcomes without destroying wealth.
The verdict
Who should hold dollars? Virtually every investor with wealth denominated in Brazilian reais. Not as a short-term directional bet, but as a structural hedge against a fiscal dynamic that remains intact. The dollar at R$ 5.20 is not "too late" — the Dilma II episode showed that when a currency move comes, it runs tens of percentage points, and investors who entered mid-cycle still protected themselves.
How much? Our read points to roughly 25% of the portfolio in dollars, complemented by 15% in CDI — the two legs of the hedge Kanczuk describes. CDI delivering a real rate above 9% pays you to wait for electoral clarity; dollars protect if the adjustment comes by force. It is a position that works in both electoral scenarios: if the fiscal risk materialises, the dollar surges; if a credible adjustment plan emerges, the elevated CDI kept compounding and the opportunity cost is small.
Kanczuk's line that captures it all: the arithmetic is easy. The fiscal position does not add up, and markets do not finance imbalances forever. Holding dollars and CDI is not pessimism — it is pricing the arithmetic before it presents the bill.
