Definition of the Brazilian Real (BRL)


What is the Brazilian real (BRL)?

BRL is the currency abbreviation symbol for the Brazilian real (BRL), the currency of Brazil. The Brazilian real is made up of 100 cents and is often represented by the symbol R $. As of September 14, 2021, USD 1 equals approximately BRL 5.26.

Key takeaways

  • The Brazilian real, abbreviated BRL, is the national currency of Brazil.
  • BRL is made up of 100 cents and is often presented with the symbol R $.
  • The Brazilian real was first adopted as the official currency in July 1994, replacing the real cruzeiro at a rate of 1 real for 2,750 real cruzeiro.
  • The BRL was pegged to the US dollar from 1994 to 1999 for the sake of stability.
  • The global financial crisis caused by the Russian debt default and inflationary pressures forced the COPOM to partially float the BRL against the US dollar.

Understanding the Brazilian Real (BRL)

The Brazilian real (plural of reales) is regulated by the monetary policy committee (COPOM) of the Central Bank of Brazil (BCB). It was first adopted as the official currency in July 1994, replacing the real cruzeiro at a rate of 1 real with 2,750 real cruzeiro. This change was in accordance with the Real Plan (“Real Plan”). In 1994, the real was pegged to the US dollar.

There have been multiple commemorative coins produced by the central bank, the most recent being a 1 real coin for the 2016 Summer Olympics and another for the 50th anniversary of the Brazilian central bank. In total, the central bank has issued seven commemorative coins since 1995. Today, there are 6 real denominated coins in circulation, one of 1, 5, 10, 25 and 50 cents and a 1 real coin.

Following its introduction, the real strengthened against the US dollar at a rate of BRL 1 to USD 1.20, as its growing economy attracted large capital inflows. This prompted the central bank to intervene to stabilize the currency’s appreciation by anchoring it to the US dollar. This lasted until 1999, when the default on Russian debt caused a serious disturbance in global financial markets, especially in emerging markets. Brazil’s economy, along with other emerging market economies, was affected by the withdrawal of foreign investors. much. This led to the weakening of the real along with most emerging market currencies and forced the COPOM to partially float the BRL against the US dollar.

Brazil’s economy in 2021

Brazil was one of the first countries to be classified as an emerging market, along with Russia, India and China (BRIC), and is now reclassified as an advanced emerging economy. It is still considered one of the world’s leading granaries and accounts for about 40% of the world’s coffee supply.

According to the latest projections of the IMF (International Monetary Fund), the Brazilian economy, in terms of gross domestic product (GDP), is ranked 13th largest in the world with 1.491 trillion dollars. The GDP deflator is expected to rise 4.26% from its 2020 index level and GDP per capita is forecast to be approximately $ 7,010.8.

Inflation is expected to average 4.6% by 2021 and both imports and exports are projected to rebound after the COVID-19 pandemic-induced contraction, although the former are expected to far outpace the latter. The unemployment rate is forecast to rise to 14.49%, an increase of 9.4% from its 2020 reading of 13.24%. Brazil’s current account deficit is expected to decline to USD -8.9 billion from its 2020 reading of USD 12.46 billion.

BRL conversion example

As of September 14, 2021, the USD / BRL exchange rate is at 5.2398. That means that 1 USD is worth 5.2398 BRL. If the USD / BRL rate rises to 6.1234, that means that the Brazilian real has weakened against the US dollar, as 1 USD is now worth more BRL, 6.1234 to be exact. Another way to see is that the dollar has strengthened against the real.

If, on the other hand, the USD / BRL rate falls to 4.6789, that means that the Brazilian real has risen in value relative to the USD, as USD 1 is worth less BRL, 4.6789 to be exact. Another way to interpret this is that the dollar has weakened against the real.

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Mark Holland

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