Brazil - Money

From the 1970s onwards, government spending and service of the public debt were the reasons for high inflation, and the subsequent rise in prices. Inflation was Brazil's greatest monetary problem until President

Fernando Henrique Cardoso in the mid-1990s adopted measures to slow down government spending and renegotiate public debt in order to contend with inflationary pressures. Brazil's currency was constantly devalued against the U.S. dollar. Currency devaluations generated incentives for the export market, decreasing the trade imbalance caused by debt payments and excess imports of manufactured goods. Devaluation helped the export market, which expanded its production when exports were given a price advantage provided by cheaper products in the world markets, but also represented a burden for domestic consumers who faced higher prices on imported goods. In the period from 1995 to 2000, the real devalued by approximately 100 percent. In 1995, 1 U.S. dollar was equal to 0.9176 reals. In 2000, 1 U.S. dollar was equal to 1.8302 reals. The devaluation was largely felt in early 1999, when the central bank of Brazil adopted a floating exchange rate system. The real then fell by 56 percent from 1998 to 1999.

In the past, Brazil had as many as 9 regional stock exchanges. However, with consolidations of the stock markets in the early 1990s and the advent of electronic trading, all securities transactions in Brazil are carried out in São Paulo, at the São Paulo Stock Exchange (BOVESPA). There are approximately 1,100 companies listed on the São Paulo exchange. The total market valuation of all listed companies on the São Paulo Exchange was US$228.6 billion in February 2001. Daily transactions are published in the leading newspapers and are available on the Internet. BOVESPA is part of the leading technology exchanges, offering electronic and after-hours trading options. The Rio de Janeiro Stock Exchange is the oldest financial institution in the country, founded in 1845. The Rio de Janeiro exchange is responsible for all the transactions in government bonds. Futures transactions are carried out at the Mercantile Futures Exchange (BM&F). Located in São Paulo, the BM&F has been operating since 1986 and is used mainly by coffee, beef, and cattle producers and buyers.