Currency (Brazil)

Brazil has had a complex monetary history, notable for a variety of mediums of exchange, chronic currency shortages, and in recent times, periods of hyperinflation. Until 1942 the basic unit of account was the real (plural réis), or milreis (1,000 réis, written as 1$000). Its origin was in silver and billon (silver and copper alloy) coins first struck in Portugal in the 1300s, and the name was derived from a similar Castilian piece. In time, the value of all gold, silver, billon, and copper coinage, of which there were many types and denominations, was expressed as so many réis, but identified also by specific name and as multiples of smaller coins or divisions of more valuable ones. Copper coins as small in value as a single or one and one-half réis were coined until the 1680s. Silver coins included the vintém (20 réis), tostão (100 réis), and meio-tostão (50 réis). The gold coins of the time were the cruzado (400 réis), quarto de cruzado (100 réis), and the Portuguez of 10 cruzados, or 4,000 réis (4$000). For large sums, such as the financial transactions of merchants and the state, the term conto (equal to 1,000 milréis) was employed (expressed as 1:000$000).

Early on, however, specie was used mainly in colonial ports. Cowrie shells (zimbos) and commodities (brazilwood, sugar, tobacco, cattle, cotton, cotton cloth or thread, even slaves) were customarily bartered for trade goods. Where coins were used, Spanish silver pesos were common. In the 1640s, during the era of West India Company occupation of the northeast coast, the Dutch were the first to mint money (florins) for local use. Currency debasement was the rule in Portugal in the late seventeenth century, but following the establishment of colonial mints after gold was discovered in the interior of Brazil (1697 onward), a policy of "strong money" for the mother country was adopted. Gold and silver products of mints at Bahia and Rio de Janeiro were valued differently for Brazilian and Portuguese usage in order to limit the outflow of money from the colony. Gold dobras, peças, and escudos; silver patacas and tostões; and silver and copper vintems and réis were produced by these mints. Gold, in the form of bars or ingots and gold dust, was allowed to circulate as legal tender, but only in the region of the mines. Locally restricted currency issues were common in other provinces as well.

Following independence from Portugal (1822), currency shortages spawned widespread counterfeit copper coins. Paper money, in very limited use in the late eighteenth century in Portugal, was promoted by the establishment of the Bank of Brazil (1808–1829; 1853 onward) and by the founding of provincial banks throughout the nineteenth century. A national monetary system was established in 1833, but old coins continued to circulate along with new mintings; foreign coins, such as British sovereigns and U.S. dollars, were also permitted. After 1922 the national bank became the sole issuer of paper notes, and gold coins ceased to be struck.

In 1942 the cruzeiro (equal to 1$000 and divided into 100 centavos, with its symbol Cr$) succeeded the venerable milreis. Subsequent currency reform in 1965 created the cruzeiro novo. Since then monetary policies designed to reverse inflation have introduced frequent currency shifts, including the cruzado (1986), cruzado novo (1989), the return of the cruzeiro (1990), and the cruzeiro real (1993). Currency reform in 1994, known as the Plano Real, restored the real (plural réais), first as a basic unit of account or Unit of Real Value (URV) pegged to the U.S. dollar (initially 647 cruzeiros réais = 1 URV). In mid-1994 the currency was renamed the real (R$), a name it has retained into the twenty-first century, although it has not held a fixed exchange rate since the late 1990s.

See alsoBanking: Overview .

BIBLIOGRAPHY

Cavalcanti, Amaro. O meio circulante nacional, vol. 1 (1983).

Dos Santos Trigueiros, F. Dinheiro no Brasil, 2d ed. (1987).

Franco, Gustavo Henrique Barroso. The Real Plan and the Exchange Rate. Princeton, NJ: International Finance Section, Department of Economics, Princeton University, 2000.

Frieden, Jeffry A., and Ernesto Stein. The Currency Game: Exchange Rate Politics in Latin America. Washington, DC: Distributed by the Johns Hopkins University Press for the Inter-American Development Bank, 2001.

Lopes Fernandes, M. B. Memória das moedas correntes em Portugal, 2 vols. (1856–1857).

Pandia Calogeras, João. A política monetária do Brasil (1960).

Prado, Maria Clara R. M., ed. A real história do real. Rio de Janeiro: Record, 2005.

Sombra, S. História monetaria do Brasil colónial (1938).

                                        Catherine Lugar