What is the Brazilian Monetary Unit?
The Brazilian monetary unit is the Brazilian real (plural reais), which is the official currency of Brazil. It is subdivided into 100 centavos and has the symbol R$ and the ISO code BRL. The Central Bank of Brazil is the central bank and the issuing authority of the Brazilian real .
The Brazilian real was introduced in 1994, replacing the cruzeiro real, which was the last of a series of currencies that had been renamed and redefined several times through Brazil’s history. The Brazilian real was part of a plan to stabilize the Brazilian economy and end a period of hyperinflation. The name “real” means “royal” or “real” in Portuguese and was also used for the colonial currency of Brazil.
The Brazilian real has both coins and banknotes in circulation. The coins are issued in denominations ranging from 1 centavo to 1 real, while the banknotes are valued from 2 to 200 reais. The obverse of each banknote features a sculpture symbolizing the republic, except for the 10-real note, which depicts Pedro Ãlvares Cabral, a Portuguese explorer who is considered to have been the first European to reach Brazil; the reverse sides show images of wildlife, such as the crane, the arara bird, and the leopard.
The Brazilian real is one of the most traded currencies in the world and has a floating exchange rate that fluctuates according to market forces. The value of the Brazilian real depends on factors such as inflation, interest rates, trade balance, and political stability. As of May 4, 2023, one Brazilian real was worth about 0.18 US dollars or 0.15 euros.
The Brazilian real has undergone several changes since its introduction in 1994. In 1998, the Central Bank of Brazil adopted a crawling peg system, which allowed the real to depreciate gradually against the US dollar within a predetermined band. However, in 1999, after a series of financial crises and speculative attacks, the Central Bank of Brazil abandoned the crawling peg and let the real float freely. This resulted in a sharp devaluation of the real and a rise in inflation.
In 2003, the Central Bank of Brazil adopted an inflation-targeting regime, which aimed to keep inflation within a certain range by adjusting the benchmark interest rate. This policy helped to reduce inflation and restore confidence in the Brazilian economy. The real appreciated steadily against the US dollar until 2011, when it reached its highest value of 1.54 reais per dollar. However, since then, the real has depreciated due to various factors, such as lower commodity prices, slower economic growth, fiscal imbalances, and political uncertainty.
The Brazilian real is also influenced by the exchange rate policies of other countries, especially the United States and China. The US dollar is the main reference currency for international trade and investment, and its movements affect the demand and supply of other currencies. The Chinese yuan is another important currency for Brazil, as China is Brazil’s largest trading partner and a major buyer of its commodities. The devaluation or appreciation of the yuan can have significant impacts on the Brazilian real and its trade balance.