Brazilian Real (BRL): Meaning, Economy, Conversion Example

What Is the 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 July 29 2022, $1 USD is equal to roughly 5.17 BRL.

Understanding the 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 2022

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 International Monetary Fund (IMF) projections, Brazil's economy, in terms gross domestic product (GDP), is ranked as the 13^th largest in the world at $1.608 trillion USD. The GDP deflator rose to 11.1% in 2021, up from its 2020 index level of 4.8%, and the GDP per capita came in at about $7,518.8.2 USD.

Inflation was running at 10.08% on an annual basis as of July 2022, 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. Brazil's unemployment rate actually declined to 9.4% in the same timeframe, versus over 14% in 2021. Brazil's current account deficit also decreased to -$2.14 billion USD from its reading of over $8 billion USD at the beginning of the year.

BRL Conversion Example

As of July 29, 2022, the USD/BRL exchange rate is at 5.17. That means that $1 USD is worth 5.17 BRL. If the USD/BRL rate moves up to 6.17 that means that the Brazilian real has weakened versus the U.S. dollar, as $1 USD is now worth more BRL, 6.17 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 4.17, then that means that the Brazilian real has increased in value relative to the USD, as $1 USD is worth less BRL, 4.17 to be exact. Another way to interpret this is that the dollar has weakened versus the real.