Today, international business is the way of the world. New businesses and established entities expand their presence globally, which means integrating with different national policies, procedures, payment structures, and currencies. No two countries are alike in their economic platform, and it's essential to know the currency and its affiliated exchange guidelines and updates. Below is a summary of working within one of the hottest emerging markets in the world: Brazil. In this article, the currency and its infrastructure are outlined and useful information about spending and investing in Brazil.
1. What is the Brazilian Real?
Throughout its rich history, Brazil's currency has undergone several changes that coincide with the country's development. The latest and current currency is the Brazilian Real, which was integrated in 1994. The Real replaced the Cruzeiro Real through the Plano Real. At the time of this plan's inception, the Brazilian government's goals were to settle the public deficit, do away with inflation-based corrections in the market, lower import taxes, and grow and foster international reserves until a new Brazilian currency was put into circulation. The concept was to induct a brand-new currency that would ebb and flow alongside the strong U.S. Dollar. In aligning with a major currency, this would result in a healthy and stable economy. It worked. Today, Brazil has a thriving economy, a booming tech sector that's attracting VC investors, and the Real is a major contender in the emerging markets sector.
In reestablishing its currency, Brazil's economy enjoyed positive effects and continues to flourish. Cash is the preferred method of payment in Brazil, giving weight and importance to the Real. Investors and transplants looking to open bank accounts in Brazil may do so only with the Real currency.
Subunits and Symbols of the Real
Since cash is king in Brazil, it's necessary to know the currency's bill and subunit assignments. As with many currencies, the Brazilian money comes in bills (Reais) and coins. The coin subunit is called the centavo, which counters at a 100 to one Brazilian Real ratio. In writing, the currency is marked as R$. Notes are available in R$1, R$2, R$5, R$10, R$20, R$50, R$100, and centavos come in coins valued at 5, 10, 25, and 50. Investors and traders will want to watch the Real's performance to stay on top of the curve. When keeping up with the world markets, the Brazilian Real ISO symbol is indicated by BRL.
2. What is Brazil's Highest Monetary Authority?
In processing and managing money, the Central Bank of Brazil is the main artery. The Central Bank is part of the National Financial System (SFN) within the Brazilian governmental financial structure. The SFN is tiered into three branches: regulatory, supervisory, and operational. In the regulatory arm, policies and guides are set regarding the SFN's function. The supervisory arm oversees these established rules and the work in progress on the operational side, whose responsibility is to be an intermediary in financial workings for the public and auxiliary institutions.
Under the regulatory board falls the National Monetary Council, which promotes the economic and social happenings while also creating the financial parameters and exchange rate policies. The Central Bank of Brazil, the hub for currency, is one of two extensions (the other being the Securities Exchange Commission) under the National Monetary Council.
The Central Bank handles many duties, including counterfeiting protection, which keeps the economy healthy. In fact, the Real is one of the safest currencies in the world. The bills are protected using high-end technologies through watermarking, optical viable magnetic ink, magnetic security thread, and many other security elements. The Central Bank manages the design and implementation. At their discretion, printing orders, replacement of bills and coins, and integration of bills in times of economic growth are all duties the Central Bank manages. When new distribution or replacement is approved, the Central Bank of Brazil will turn the processing over to the Brazilian Mint.
3. Is the Brazilian Real Fixed or Floating?
Fixed currencies are managed through the government. In a fixed currency, exchange rates are static and assigned by the government. This situation requires the currency to "fix" against a major currency, like the Euro, the USD, or the British Pound. To keep the static exchange rate, the nation's central bank will engage in the foreign market to buy and sell its own currency to maintain the exchange rate fixed.
Some countries prefer a floating currency. The floating rate does not go through the foreign market, but the private market where the currency value is subject to supply and demand. As these elements shift, so does the currency exchange rate to stimulate economic growth.
The Brazilian exchange rate has been both fixed and floating at different times. When it was established in 1994, the Real was fixed to the USD, though in 1999, the Real became floated to the USD, which is its current position.
4. Is the Brazilian Real a Restricted Currency?
Some governments impose restrictions on their currency. The goal of restrictions is to create stability and health for a nation's economy. When currencies take big swings in value, it puts the economy at risk. For countries looking to grow or nurture their financial status, restricted currencies hamper potential significant valuation fluctuations for a safer, smoother economic foundation.
Generally, restrictions include tactics like non-convertible currency exchange, government approval for those looking to trade, preventing or limiting transactions and purchasing with foreign currency, and setting exchange rates for the nation, as in a fixed situation.
The Brazilian Real is among many popular currencies that impose restrictions. Other restricted currencies include the Chinese Yuan, the Indian Rupee, and the Chilean Peso. Brazil's restrictions are not terribly impeding. They include onshore FX transactions. When a person or organization would like to send or trade money, the Real currency is not permitted to transfer beyond Brazil's borders.
5. Foreign Spending in Brazil and Brazilian Real Conversion
While the Brazilian Real is restricted to Brazilian soil, it's easy to convert from most currencies, and you can even find USD notes within the Brazilian marketplace. In Brazil, converting major currencies to the Real is easy through exchange services. Common exchanges between BRL to USD, BRL to EUR (Euro), and BRL to GBP (British Pound) are done best through banks and exchange services due to restrictions.
As is the case when visiting many countries, when converting money to the Real, exchange fees apply, of course, so it pays to consider this during exchange planning. The most popular method to retrieve Reals is to visit an ATM machine, although there are potential limitations to the withdrawal amount. Credit cards, however, are popular in Brazil just like anywhere else, so travelers would do well to bring a Visa or MasterCard. As mentioned earlier, many retail establishments accept USD, and sometimes those shops can even convert USD to Real for you. Most places are aware of the exchange rate. Due to its close alignment, it's easy to go between the Brazilian Real to USD.
6. The Future for the Brazilian Real
As the world establishes a global presence, and Brazil grows as an even greater attraction to the tech industry, the Brazilian Real will continue to be a currency of promise and focus. Even in rocky times, the Real has shown resilience, proving this not so new currency has the same staying power and potential as the country it represents.