Brazilian Real – Currency Overview

• ISO Code: BRL
• Symbol: R$
• Subunit: 1/100 centavo
• Inflation: 3.14%
• Nickname: -----

Historical Overview

The Real (plural réis ), was first introduced into circulation in 1654 during the Dutch occupation of the Brazilian Northeast and became Brazil's official currency in 1690. During the Real's lengthy lifespan it has experienced radical inflation, causing the base currency unit at one point to shift to the mil réis – one thousand réis, and even to the conto de réis - one million réis, during the later years of the República Velha period. The modern real (plural reais) was introduced on July 1, 1994 as part of Plano Real - a general plan to stabilize the Brazilian economy undertaken during the presidency of Itamar Franco. The rate at which it was introduced was R$1.00 = 1 unidade real de valor (URV, "real value unit"), 1 URV being equal to 2750 cruzeiro reais, a short lived monetary unit preceding the modern real.

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Following a short lived period of the Real's appreciation, in 1996 the currency began a gradual downfall which culminated in the 1999 currency crisis, when the Real suffered a severe devaluation, and fluctuated wildly. Following this period the new central bank president Arminio Fraga implemented a policy to combat inflation, which meant the end of the fixed exchange era for the Real. Having said this, the real has never been a true free floating currency. Seeing as the Brazilian central bank frequent intervened in order to manipulate its dollar price, it's status is more accurately described as a managed or "dirty" float.

The currency continued on a path of gradual depreciation until 2002, when the Real actually reached its historic low of almost R$4 per US$1. However, since then thanks to the continued assurances by Arminio Fraga and his successor to continue to implement macroeconomic policies, the real has been getting stronger and stronger against most of the world currencies.

Current Global Status

Since the crisis of 2002, the Real has been steadily gaining strength in the world currency market. 2005 had been a particularly successful year when it had managed to gain ground on a number of world currencies apart from the USD. It is still not considered one of the major currencies in the foreign exchange market, most likely due to its history of instability, however things are certainly looking up for the Real as it becomes more and more available for trade.

Against the USD

When first introduced, the new Brazilian real enjoyed a few years of appreciation against the US dollar during 1994 and 1995 due of large amounts of capital inflows buoying the Brazilian economy during these years. Then in 1996 the real began sliding down against the dollar in a constant downfall that continued until 2002. Since then the real has been gaining ground. In the year of 2007, the real became worth more than 50 U.S. cents for the first time in recent years. As of late 2008 the value of the real has been fluctuating around 0.43 USD.

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