With one year to go before Rio de Janeiro hosts the Olympics, Brazil’s central bank unveiled new commemorative coins on Thursday. The 1-real denomination is worth just half what it was against the U.S. dollar when Rio won hosting rights.
The ceremony was held at the site of the Olympics’ opening ceremony -- the Maracana stadium -- the roof of which was illuminated with the yellow, green and blue colors of the national flag. The same day, Brazil’s currency plunged for the sixth straight day, falling below 3.5 reais per dollar for the first time in more than 12 years.
The real has weakened more in the past year than any of the 16 major currencies tracked by Bloomberg, boosting the cost of imports and helping drive inflation to more than double the targeted rate. That’s eroding Brazilians’ purchasing power, affecting their ability to travel abroad and contributing to a drop in confidence to a record low.
“With inflation, money is worth a little less,” said Lucineia Custode, 42, while serving vegetable hor d’oeuvres to smartly dressed men and women at the Maracana. She plans to travel to Disney World next year with her husband, and may have to cut her trip short because of the exchange rate, she said. “You have to prepare, plan, and buy ahead of time because, if not, you can’t go.”
Brazil’s inflation accelerated to 9.56 percent in July, more than double the 4.5 percent target and its fastest since November 2003, according to data released Friday by the national statistics institute. The real weakened 0.8 percent, to 3.5639 per dollar, at 9:33 a.m. local time. It has declined 50 percent since Oct. 2, 2009, when Rio was awarded the 2016 summer Olympics.
That doesn’t take any of the joy away from the new coins, according to Joao Sidney de Figueiredo Filho, head of the central bank’s currency management department. He said 16 commemorative 1-real coins will ultimately be presented, with 20 million of each entering circulation, meaning there’s enough for all 205 million Brazilians.
“These coins are collectible, their value is intrinsic because of the art that is involved,” Sidney said on the sidelines of the event. “They serve for circulation, but I think people will keep them as souvenirs.”
The real has weakened more than justified by Brazil’s economic fundamentals, according to a statement from central bank Monetary Policy Director Aldo Mendes on Thursday. The most recent sell-off started July 22, when Finance Minister Joaquim Levy cut Brazil’s fiscal target. President Dilma Rousseff has suffered setbacks in Congress that further erode government efforts to shore up fiscal accounts.