What Kind Of Currency Does Brazil Use?

September 27, 2023

Brazil's official currency is the Brazilian Real. Each centavo is divided into 100. The central bank and issuing body is the Central Bank of Brazil. In 1994, the real took the place of the cruzeiro real. The real was the tenth most traded currency as of April 2019.

Prior to the present Real, the following currencies were used:

  • From the sixteenth to the eighteenth centuries, the Portuguese real had 1,000 réis, known as milréis.
  • The milréis, or ancient Brazilian real, was a unit of 1,000 réis used from 1747 to 1942.
  • The first cruzeiro, valued as 1 cruzeiro = 1 milréis or 1,000 réis, was in use from 1942 to 1967.
  • the cruzeiro novo, valued at 1 cruzeiro novo for every 1,000 first cruzeiros, from 1967 to 1970. It was used until 1986 and was referred to as the (second) cruzeiro starting in 1970.
  • Cruzado from 1986 to 1989, where 1 cruzado is equal to 1,000 cruzeiros per second.
  • From 1989 to 1990, there were 1,000 cruzados in one cruzado novo. Due to the Plano Collor, it was called the (third) cruzeiro starting in 1990 and was used up until 1993.
  • From 1993 to 1994, one cruzeiro real was equal to 1,000 third cruzeiros.
  • One real is equal to 2,750 cruzeiro reais in the current Real, which was adopted in 1994.

The current Real, often known as the reais or reals in English or Portuguese, was first issued on July 1, 1994, while Rubens Ricupero served as Brazil's Minister of Finance as part of the Plano Real, a larger initiative to stabilize the country's economy. The short-lived cruzeiro real (CR$) was replaced by the new currency. The reform called for a significant replacement of banknotes and included the demonetization of the cruzeiro real.

A non-circulating currency unit called an unidade real de valor (URV, "real value unit") was used to define the real at the time of its inception. The URV was also determined to be worth 2,750 cruzeiro reais, which was the average exchange rate on that day between the U.S. dollar and the cruzeiro real. 

As a result, when the deal was first created, it was valued at exactly one dollar. This reform made the new real equal to 2.75 1018 (2.75 quintillions) of Brazil's original réis, taking into account all prior currency adjustments throughout the nation's history.

Due to significant capital inflows in late 1994 and early 1995, the real unexpectedly increased in value relative to the US dollar shortly after it was introduced. It reached its highest dollar worth ever, at $1.20, during that time. 

As soon as Lula gained office and reiterated his commitment to carry on his predecessor's conventional macroeconomic policies, along with his finance minister Antonio Palocci and Arminio Fraga, the crisis subsided (including inflation-targeting, primary fiscal surplus, and floating exchange rate, as well as continued payments of the public debt). 

The real's value in dollars continued to vary, but it did so typically in an upward direction. By 2005, the exchange rate was just over R$2 to US$1. The real exceeded US$0.50 in May 2007 for the first time since 2001 (six years), despite efforts by the Central Bank to maintain it below that symbolic level out of concern for the real's impact on the Brazilian economy. 

Lula's government began on January 1, 2003, with an exchange rate of US$1 = R$3.52, and it ended on December 31, 2010, with an exchange rate of US$1 = R$1.66. R$4.05 to US$1.00 was the exchange rate as of September 2015. It gradually recovered for some time before reaching 3.0 BRL per USD in February 2017.

The financial markets initially greeted Jair Bolsonaro's presidency with joy, with the exchange rate of US$1=R$3.86. Fueled by the economy's underwhelming performance, rapid disillusionment set in, which contributed to a lack of foreign investment and the real's sharp depreciation. The real hit a record low against the US dollar on May 13, 2020, during the COVID-19 epidemic, which severely devastated Brazil. The exchange rate was US$1=R$5.90.

If you are interested in more articles like this, here’s one about when the dollar became the world currency.

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