What Is Brazilian Real (BRL)?

BRL is the currency abbreviation symbol for the Brazilian real (BRL), the currency for Brazil. The Brazilian real is made up of 100 centavos and is often presented with the symbol R$. As of September 14, 2021, 1 USD is equal to roughly 5.26 BRL.

Key Takeaways

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

Understanding Brazilian Real (BRL)

The Brazilian real (plural reais) is regulated by the Central Bank of Brazil's (BCB) monetary policy committee (COPOM). It was first adopted as the official currency in July 1994, replacing the cruzeiro real at a rate of 1 real to 2,750 cruzeiro real. This change was in accordance with the Plano Real ("Real Plan"). In 1994, the real was anchored to the U.S. 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 denominated real coins in circulation, a 1, 5, 10, 25, and 50 centavos and a 1 real coin. 

Upon its introduction, the real strengthened against the U.S. dollar to a rate of 1 BRL to 1.20 USD as its growing economy attracted large capital inflows. This led to the central bank stepping in to stabilize the currency's appreciation by anchoring it to the US dollar. This lasted until 1999 when the Russian debt default led to a severe disruption in global financial markets, especially emerging markets. Brazil's economy, along with other emerging market economies, was affected as foreign investors pulled out en masse. This led to the real weakening along with most emerging market currencies and forced COPOM to partially float the BRL against the U.S. dollar.

Brazil Economy in 2021

Brazil was one of the initial countries that was 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 to be one of the world's major breadbaskets and accounts for about 40% of the world's coffee supply,

According to the latest IMF (International Monetary Fund) projections, Brazil's economy, in terms gross domestic product (GDP), is ranked as the 13th largest in the world at USD 1.491 trillion. The GDP deflator is expected to rise by 4.26% from its 2020 index level and the GDP per capita is forecast to be about USD 7010.8.

Inflation is expected to average 4.6% for 2021 and both imports and exports are projected to rebound after the COVID-19 pandemic induced contraction, though the former is expected to far outpace the latter. Unemployment rate is forecast to tick up to 14.49%, a rise of 9.4% from its 2020 reading of 13.24%. Brazil's current account deficit is expected to decrease 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 moves up to 6.1234 that means that the Brazilian real has weakened versus the U.S. dollar as 1 USD is now worth more BRL, 6 .1234 to be exact. Another way to look at is that the dollar has strengthened versus the real.

If, on the other had, the USD/BRL rate were to fall to 4.6789 then that means that the Brazilian real has increased in value relative to the USD as 1 USD is worth less BRL, 4.6789 to be exact. Another way to interpret this is that the dollar has weakened versus the real.