Michael Sommers, author of the Moon Travel Guide to Brazil, published recently a blog post with the title The World’s Most Overvalued Currency reflecting on how expensive Brazilian has become in recent years – for those coming to visit the country but for those living in Brazil too!

Essential reading, as it is the case with anything written by one of the best-informed travel writers on Brazil.

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New R$50 and R$100 bank notes are being issued today in Brazil. The new notes introduce new anti-counterfeit measures. The Brazilian Central Bank is launching first the notes with the highest values. During 2011 and 2012 the remaining notes will be replaced as well.

Below, the way the new notes look according to the site of the Banco Central do Brasil

The current notes will remain legal tender for as long as they exist. They will be replaced by the new notes as they get worn out.

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A financial analyst from bank Itau (one of the largest Brazilian corporations) told me last week that the bank doesn’t expect big shifts in the current relationship between the Brazilian real and the US dollar and the euro. In other words, an overvalued real is likely to stay, at least for the next few months.

Bad news for foreign tourists as an overvalued local currency adds more pressure on your travelling budget. Good news for Brazilians planning a trip abroad.

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Money and currency

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The Brazilian Central Bank acknowledged recently what anybody who’s been to Brazil for longer than two months knows perfectly well: there is a serious shortage of small change in the country. The reasons are diverse. The bank blames piggy banks, poor things.

Whether the pigs are guilty or not, the truth is that a by-product of the lack of small change is the irritating practice of always rounding up the change – in favour of the seller, not the buyer. This is a constant practice in all commercial transactions, and 9 out of 10 times the balance is tipped against you. If you pay with a R$5 note for something worth R$4,97, you can be sure you will not get any change in return.

While one tends to accept this practice in the case of small shops or people selling stuff on the streets, one wonders what the impact of this practice is on the cash-flow of large supermarket networks.

Even more annoying is the practice of trading money for sweets or chewing gum. Your meal costs R$9,80 and you pay with a R10,00 note? You might be offered two pieces of chewing gum instead of the R$0,20 you are owed. Please note that this is a one-way practice. You will never be allowed to pay for your meal with chewing gum.

P.S.: of course this is a common practice in many other countries around the world. But in my personal experience, this practice happens in Brazil with an alarming frequency.

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A vitamin-enriched real – the Brazilian currency, reached on Friday an all-time high against the dollar. Not since 1999 had a real bought so many dollars. On Friday, 1 US dollar would buy you 1,5895 reais. 1 euro would buy 2,5194 reais (I’m mentioning here the “comercial” quotation of the dollar, for more info read also at this blog differences between “comercial”, “turismo” and “paralelo” dollars).

This is basically bad news for anyone planning a trip to Brazil. Irrespective of the evolution of prizes within Brazil, Brazil is a much more expensive country for anyone coming from Europe or the United States. To make matters worse, the current inflationary tide sweeping the world is being felt in earnest in Brazil. In a few months, food prices have gone up to 30% in some of the largest cities of Brazil. As a result, restaurants have increased their prices considerably in the last couple of months. I won’t even bother mentioning the rocketing airfare prices, another factor that will be heavily felt by visitors to the country.

More than ever, comparing prices is the name of the game.

At the money category of the blog you can read all the blog entries published on the subject.

Credit card fraud is widespread in Brazil. Duplication of credit cards has become a major problem, with hundreds of active gangs specialized on the fraud.

Can credit cards be used in Brazil? Yes, they can, taking some basic precautions. The most important thing is to understand that the duplication of the card takes places when the card is out of your sight. Think of the waiter that takes your card away, has a hidden reader, and duplicates the card on the way to and from the cash counter.

My advice is: at the time of paying, you need to be able to see where the card reader is. On a shop or supermarket, more likely than not the reader will be by the till. In cases like this, the risk of duplication is small. Just make sure before signing the value on the credit card receipt matches what you are supposed to be paying. If instead of R$100 the receipt shows R$1,000, and you sign the receipt, there will be little you can do back home to get the money back.

Quite a number of restaurants will bring a swipe machine to the table. That’s ok. If the waiter needs to take away the card, go along with him, that’s a normal practice in Brazil. If you don’t trust the place, pay with cash.

I do not advice using your credit card with manual swippers (knuckle busters).

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What is the difference between the “comercial”, the “turismo” and the “paralelo” dollar?

A technical explanation would be far too boring, plus I’m don’t have sufficient knowledge to deliver it. My approach will be more practical:

• dólar comercial: it’s the one used in trade, imports, exports, and financial operations. When you withdraw local currency from a Brazilian ATM the exchange rate that will be applied to you will be very similar to the one of the dólar comercial.
• dólar turismo: its exchange rate is applied to the purchase of dollars for tourism purposes. If you exchange money at a bank or bureau de change/currency exchange, the exchange rate that will be applied to you will also be the one of the dólar turismo. The exchange rate of the dólar turismo is also applied when a Brazilian buys a flight or a package holiday quoted in dollars.
• dólar paralelo: used in the black market. Its exchange rate appears on the press because of the importance of irregular operations carried out on a daily basis through black market operators (doleiros). The exchange rate of the dólar paralelo is of no interest to the tourist.

[Don't forget there is a list of all the questions & answers published in the blog here]

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Do I bring euros or do I bring dollars?

If you are coming from Europe, bring your euros, there is absolutely no need to change them into dollars. Wherever dollars are exchanged, euros are exchanged too. If your currency is the dollar, then bring dollars, of course.

SEE ALSO: money and currency

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The Brazilian currency is the real (its symbol, R$). Only banks from neighbouring countries will exchange reales. You are advised to take dollars or euros with you. If coming from Europe, there is no need to exchange euros into dollars. Euros ares as easy to exchange as dollars.

Traveller’s cheques are not an interesting option when it comes to Brazil. They are difficult to cash, and the exchange rates are always less favourable than the rates for hard currency.

Euros and dollars are only accepted in expensive shops and very touristic places (Rio, Iguazu). The exchange rate is never good. In most parts of Brazil, only reales are accepted. There are several ways of obtaining reales:

• at a bank
• at a currency exchange/bureau de change
• withdrawing money from an ATM

Currency exchanges/bureaux de change usually offer a more favourable exchange rate than banks. On top of that, the red tape involved in exchanging money at a bank is non-existent at a currency exchange/bureau de change. Currency exchanges/bureaux de change at airports always offer worse rates than the ones downtown.

There isn’t a unified ATM network in Brazil. Each bank operates its own network, not interlinked to the network of the other banks. The exception is the red 24horas, used by several different banks. There is a considerable number of ATMs that will allow withdrawals with a VISA or MasterCard card. Among them, the mentioned 24horas as well as the Bradesco and HSBC’s ATMs.

SEE ALSO: Difference between “commercial”, “turismo” and “paralelo” dollar
Euros or dollars?

Yahoo currency converter

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