The Brazilian real (BRL) has faced significant devaluation over the past decades, raising concerns for domestic savers, international investors, and businesses operating in Latin America’s largest economy. Once introduced as a symbol of monetary stabilization, the real now often finds itself vulnerable to political shifts, global market fluctuations, and structural economic challenges.
For finance professionals and investors alike, understanding the real’s trajectory — from its origin to its comparative decline against major currencies like the U.S. dollar (USD) and the euro (EUR) — is essential to assess whether keeping money in BRL-denominated assets is a viable investment strategy in 2025 and beyond.
A Brief History of the Real: Stability Turned Fragile
The Brazilian real was launched in July 1994, during President Itamar Franco’s administration, as part of the Plano Real — a bold economic plan designed by Finance Minister Fernando Henrique Cardoso to combat Brazil’s hyperinflation. At that time, Brazil was experiencing inflation rates exceeding 2,000% per year, and the new currency was introduced with a strong backing and an almost 1:1 parity with the U.S. dollar.
Initially, the real was pegged to the dollar and supported by high interest rates to attract foreign capital. However, following the 1999 currency crisis, Brazil was forced to abandon the peg and adopt a floating exchange rate regime. Since then, the real has faced continuous downward pressure, driven by a mix of political instability, fiscal deficits, and global commodity cycles.
Real vs. Dollar and Euro: A Long-Term Perspective
To fully appreciate the real’s devaluation, let’s examine how it has performed against the U.S. dollar and the euro over the years:
| Year | USD/BRL | EUR/BRL |
|---|---|---|
| 1994 | 1.00 | — |
| 2002 | 3.50 | 3.20 |
| 2011 | 1.60 | 2.30 |
| 2020 | 5.80 | 6.20 |
| 2024 | 5.30 | 5.70 |
| 2025 (Jan–June avg.) | 5.45 | 5.85 |
These numbers clearly demonstrate the long-term depreciation of the real, especially in comparison with more stable currencies backed by stronger fiscal and institutional frameworks.
As of the first half of 2025, the Brazilian real continues to show volatility and weakness, despite Brazil maintaining one of the highest interest rates among emerging markets. The USD/BRL exchange rate has averaged 5.45, while the EUR/BRL has hovered around 5.85, with fluctuations driven by both domestic uncertainty and global market dynamics.
Why Is the Real Losing Value?
Several factors have contributed to the real’s decline:
1. Political Instability
Brazil has undergone significant political turbulence over the past two decades — from impeachments, corruption scandals (Operation Car Wash), to frequent changes in fiscal policy direction. Investors tend to react negatively to uncertainty, which drives capital outflows and currency depreciation.
2. Inflation and Fiscal Mismanagement
Brazil continues to face structural fiscal deficits and an increasing public debt burden. These economic weaknesses often force the central bank to raise interest rates to attract capital, but this also limits growth and deepens reliance on foreign inflows.
3. Dependence on Commodities
Brazil’s economy is heavily dependent on exports of iron ore, soybeans, and oil. While commodity booms can strengthen the currency, any downturn quickly reverses those gains.
4. Global Risk Aversion
In times of global uncertainty — such as the 2008 financial crisis or the 2020 pandemic — investors tend to flee emerging market currencies and move their capital into safer assets like U.S. Treasuries or the eurozone.
Is Holding Money in BRL Still a Good Idea?
For Brazilian residents, salaries and daily transactions are naturally denominated in reals. However, for investors and savers, the key question is whether it makes sense to keep long-term capital in BRL.
Pros:
- High Interest Rates: The Selic rate, Brazil’s benchmark interest rate, remains relatively high compared to developed nations. In 2025, it has averaged around 10.5% per year, offering attractive returns on fixed income investments like CDBs, Tesouro Direto (Brazilian Treasury Bonds), and LCIs/LCAs.
- Short-Term Opportunities: For those who can hedge currency risk or reinvest earnings locally, Brazil’s interest rate differential can generate alpha.
Cons:
- Devaluation Risk: High nominal returns can be eroded or even reversed when adjusted for currency depreciation. For instance, an 11% annual return in BRL loses its appeal if the real devalues 10% against the dollar during the same period.
- Inflation Impact: Although inflation has stabilized in recent years, any uptick — especially in food and energy prices — can reduce the real purchasing power of BRL-denominated savings.
- Global Exposure: Savers with long-term goals (such as retirement or education abroad) may prefer to diversify into stronger currencies or global ETFs, minimizing exposure to local currency volatility.
Fixed-Income Investments in BRL: Still Worth It?
Many conservative investors in Brazil turn to fixed-income products, which often promise double-digit nominal returns. But is it still worthwhile given the real’s depreciation?
Let’s consider a scenario:
- You invest R$100,000 in a CDB yielding 11% annually.
- After one year, your return is R$111,000.
- But if the real devalues 10% against the dollar, your effective gain in USD terms is negligible — or even negative.
This highlights the importance of evaluating returns not just in nominal terms, but in real and global terms.
When Does It Make Sense?
- If your expenses and liabilities are in BRL, these investments may still serve your short-term financial goals.
- If you have local tax advantages (e.g., exemption on LCI/LCA), or your investment is inflation-linked (IPCA+), returns can be more resilient.
- If you can diversify your portfolio with part in BRL (for yield) and part in USD or EUR (for protection), you may balance risk more effectively.
What Should Investors Do Now?
In a landscape where the Brazilian real continues to face pressure, here are a few strategies to consider:
1. Diversify Across Currencies
Don’t hold all your assets in BRL. Consider international diversification through foreign accounts, ETFs, or crypto assets with strong fundamentals.
2. Consider Inflation-Linked Bonds
Look for Tesouro IPCA+, which adjusts for inflation and pays a real interest rate, offering some protection against currency devaluation.
3. Use FX Hedging Tools
Advanced investors can use hedging instruments to manage exchange rate risks, especially if you have exposure to both BRL and USD.
4. Balance Risk and Yield
Combine high-yield local investments with low-risk foreign currency savings to achieve a balanced risk-return profile.
Final Thoughts: A Currency Under Pressure, But Opportunities Remain
The Brazilian real’s devaluation reflects deeper structural challenges in the country’s economic and political landscape. While high nominal interest rates offer potential returns, those gains can be quickly erased by currency risk, inflation, and policy uncertainty.
For investors — both domestic and foreign — the key is to understand the trade-offs, diversify smartly, and use tools available to mitigate currency risk. Leaving money in BRL might be worthwhile in the short term or for local consumption needs, but for wealth preservation and long-term growth, exposure to more stable currencies and markets is strongly recommended.
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