Introduction
The Brazilian currency is known as the real or reais in plural while the cents that make one real
are 100 centavos. The symbol of the real is R$ or BRL. The real was introduced in the year 1994
on the month of June. The real was introduced after the rampant inflation that affected the
country in the 1990’s where inflation averaged 1% per day.
The real was at par with the US dollar at the time of its introduction in 1994. It has however
fluctuated over the years the worst one being in the year 2000 where it dropped to R$4.03/USD
$1.The real has maintained a sterling performance against the dollar for some time maintaining a
reasonable margin between the two currencies. In 2009, during the financial crisis, the dollar lost
33% of its value against the real. The exchange rate fluctuated between BRL R$1.531 to BRL
R$1.7790. In the year 2010, the currency maintained a fluctuation rate between BRL R$1.70 and
BRL R$1.80 against the dollar. In the year 2011, the dollar sunk further to BRL R$1.531 almost
the same levels that it was during the 2008-9 global economic crisis (Moyer, Kretlow, McGuigan,
2011).
In the year 2010, the central bank in Brazil increased the interest rates in the country which
resulted in the real gaining more value than the US dollar (Burghardt, Belton, Lane & Papa,
2005). In April the same year, the real reached a high of 1.7205 after the country’s central bank
Economics Project – Brazilian Currency (The Real R$, BRL) 2
increased the interest rates by 0.75%. The interest rates finally reached 12.5% but the inflation
still persisted (Brazilian Currency, n, d).
The Brazilian central bank tried several spot auctions to purchase US dollars in a bid to weaken
the BRL R$ in order to contain reduce its value in an effort to make Brazilian exports appear
cheaper than others in the foreign market.
0
0.5
1
1.5
2
2.5
3
Brazilian R$ Against US $
Brazil’s R$ Exchange Rate Against the US Dollars
Date Exchange Rate Against the
Dollar
3/26/2005 2.73
6/28/2005 2.38
9/25/2005 2.26
11/11/2005 2.17
12/28/2005 2.36
3/27/2006 2.15
5/7/2006 2.05
12/29/2006 2.13
11/7/2007 1.73
8/1/2008 1.56
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3/3/2009 2.42
10/14/2009 1.71
12/30/2010 1.66
In May the year 2010, due to the Greece’s financial crisis, there was general perception that the
crisis may develop to other parts of Europe, including Brazil, Portugal, Spain, Ireland and even
Italy hence the real experienced its major lose of value during that period. Its value decreased to
1.5301. The Real recovered and later doubled its value in later years.
0
0.5
1
1.5
2
2.5
3
3.5
4
Brazilian R$ and US $
Brazil is currently one of the world’s vibrant economies and its part of the BRIC Countries. It
has one of the best economies among the emerging economies in the world. Brazil’s ETFs refer
to those funds that are traded at the stock exchange and which are invested through the country’s
stocks in the stock market or through European or US stock markets. The ETFs track only the
country’s index or any popular index in the country. Most of the Brazilian ETF rotates around
particular industries and they are not as diversified as the S & P 500 fund. The economy is
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powered by its strong natural resources production and vibrant financial markets but it is
relatively weak in technological advancement, healthcare and production of consumer goods.
The popular Brazilian ETF’s are;
iShares MSCI Brazil
The company trades under the symbols EWZ and it tracks only the Brazilian market. It strives to
ensure that its dividends reflect the earnings of the securities being traded. EWZ earnings
dropped by 56.6% in the year 2008 but recovered to 55.6% later in 2009.
Wisdom Tree Dreyfus
This is a Brazilian real fund that trades under the symbol BZF and it strives to earn similar
amounts of income as the money markets in Brazil. The fund appreciated by 17.9% from the
beginning of the year 2009 to the end of the same year.
Market Vectors (BRF) Brazil Small-Cap ETF
The fund holds capitalization for companies in Brazil that largely generate more than 50% of
their general revenues in Brazil (Ross, Westerfield and Bradford, 2010).
The following ETF factors contribute positively towards investment in Brazil;
Seasons
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The Brazilian Bovespa stock exchange index is mostly seasonal and its peaks are notably in the
month’s f October and May. The average gain during this period is about 16.4%.
Trends
By the end of the year 2009, the Bovespa stock index witnessed an improving trend that
averaged higher than its 50 day-moving average.
Basics
For most of the year 2009, Brazil led the global scene on the production of coal, crude oil, iron
ore, silver and gold. The demand for natural resources was also on the rise.
Performance
The Brazilian Bovespa performance made better gains than the S & P 500 index in April 2009.
Conclusion
To conclude, the Brazilian Real R$ has maintained its ground throughout the difficult period and
its value still continues to rise. The performance of the currency can only be viewed besides the
other currencies of highly industrialized nations like the Australian or Canadian dollars (X-Rates,
2015).
Economics Project – Brazilian Currency (The Real R$, BRL) 6
References
Brazilian Currency (n, d) Brazilian Currency,
Burghardt, G., Belton, T., Lane, M. and Papa, J. (2005) The Treasury Bond Basis. New York,
NY: McGraw-Hill.
Moyer, C., Kretlow, W., McGuigan, J. (2011). Contemporary Financial Management (12 ed.)
Winsted: South-Western Publishing Co. pp. 147–498
Ross, S., Westerfield, R.W. and Bradford, D.J. (2010). Fundamentals of Corporate Finance (9
ed.) New York: McGraw-Hill. pp. 145–287
X-Rates (2015) Rates Tables,
