A stable and competitive exchange rate is imperative for efforts to diversify an economy in an open economy setting. However, there are an increasing number of exogenous economic and political factors in Brazil and other emerging market economies that accentuate the difficulties of shifting toward a more developmentalist economic policy. Nevertheless, over the past decade or more Brazil has developed a broad array of tools that enable the country to address the exogenously determined factors related to exchange rate instability. These tools have been a modest success at best, but lay the groundwork for what may be the necessary economic policies and political conditions for a more comprehensive program to achieve stability-led diversified growth in Brazil.