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What is the Brazilian real (BRL)?

Credit Ratings & Outlook

In the latest credit ratings from December 1970, Moody's gives Brazil a Baa2 rating, with a positive outlook. Fitch has a stable outlook with a BBB rating. Finally, S&P last issued a BBB rating, with a stable outlook.

Sovereign credit ratings play an important part in determining a country’s access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets.

Central Bank Rate

The current central bank interest rate is 9.00%. This is lower than 2011, which was 11.00%.

GDP

In 2010 the total GDP was $2,087,889,553,821 in US Dollars, while the per capita GDP was $10,710. It grew by 7.49% over the previous year.

Unemployment

The latest unemployment rate for 2011 is 4.70%.

Consumer Price Index

The latest consumer price index for 2010 is 125.69.

Political Structure

The current head of the government is President Dilma Rousseff, who is also the head of state (in an executive role).

Currency Details

The Brazilian real, also denoted by BRL, is the official currency of Brazil. The BRL was implemented on July 1, 1994. The Minister of Finances at the time, Fernando Cardoso, was soon elected President as the success of the new currency took off. The real replaced the previous “cruzeiro,” which had been the monetary unit since 1942. It was introduced with distinct objectives: to tackle high inflation and to stabilize the exchange rate. In January 1999, Brazil decided to abandon the peg to the United States Dollar (USD) and devalue the real, which triggered a financial crisis.

1654: The real became the first currency officially used by the Dutch during the occupation of the territory that is now Brazil.

1690: The real became Brazil’s official currency.

1942: The real is replaced by the cruzeiro.

July 1, 1994: The real replaces the cruzeiro.

1999: The peg to USD is removed.

Moody’s Rating
B1
S&P Ratin
BB-

Sovereign credit ratings play an important part in determining a country’s access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets.

What does it look like?

Political Structure

A President who is elected by the people for a four-year term leads the Brazilian government. The bicameral Congress consists of an 81-member senate representing the 26 states, as well as the region of Brasilia, and a 513-member Chamber of Deputies. Brazil is the world leader in online voting, with over 100 million voters. There is also a court system that handles disputes between state courts. Each state has its own executive and legislative branches as well.

Prominent Figures

The President of Brazil is Luiz Inacio Lula da Silva. He took office on January 1, 2003 and will be up for re-election in 2006. Brazil’s central bank, Banco Central do Brasil, is run by a board of directors led by the Governor, Henrique de Campos Meirelles.

Unique Characteristics

Brazil has an overabundant oil supply. The nation is home to the second largest oil reserves in South America, and with such a large oil supply, Brazil has set a goal of becoming self-sufficient in oil by 2005 or 2006.

Until Brazil achieves the goal of becoming self-sufficient, Brazil will continue to import enough oil to be affected by international oil prices. Once self-sufficiency is reached, Brazil will begin to transition into becoming a net exporter that should lead to an alleviation of the pressures of international oil prices.

The Mercosur Trade Agreements: In 1991, Brazil, Argentina, Paraguay, and Uruguay created an economic union called Mercosur. They wanted to put their trade disputes aside and work together towards economic prosperity. However, promises of lifting trade restrictions have yet to be fulfilled. Instead of prosperity, Brazil’s imports in Argentina have caused a $649 billion trade deficit. The real averaged 2.65/dollar last year while the peso remained around 2.96/dollar.

Key Economic Factors

  • Consumer Price Index: The Consumer Price Index
    measures the country’s average rate of inflation at the consumer level. The index has high market impact, as it is used by markets in order to anticipate the movements of monetary policy, and also to adjust prices and tariffs in the economy. As seen in the graph, movement from mid 2004 through mid 2005 was strictly increasing.
  • Gross Domestic Product: The Gross Domestic Product (GDP) is one of the most important ways of gauging productivity and economic growth in the Brazilian economy. It is important to look for changes in real GDP growth in the nation?fs primary industries
    : agriculture, industry and services. As seen in the graph of real GDP growth, the measure is rather volatile.
  • Unemployment Situation: The unemployment rate is obtained by the using a sample of about 40 thousand households in Brazil’s six largest metropolitan areas, namely: Belo Horizonte, Porto Alegre, Recife, Rio de Janeiro, Salvador and Sao Paulo. The market impact of the unemployment rate is very high; the indicator is very closely watched and is a timelier indicator of economic health than GDP. However, it is important to bear in mind the presence of seasonal distortions as well.
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