Currency exchange and finance management for Brazilian property owners
People making the move over to South America to take up residence in their Brazilian property will surely want to manage their finances as effectively as possible. It would therefore be sagacious of them to learn about the currency exchange situation in the country.
So what is the state of the Brazilian real at the current time? One view is that the currency could strengthen against both the yen and the dollar over the coming months. According to Mitsubishi UFJ Securities, a V-shaped recovery in the nation’s economy this year will act as a spur for the central bank to raise interest rates.
Talking to Bloomberg, Hiroyuki Omiya, a New York-based executive director at Mitsubishi UFJ Securities, said that the central bank will raise its benchmark interest rate from 8.75 per cent as it is likely that growth will "accelerate to the mid-five per cent level this year from a little over zero per cent in 2009".
"We are getting more inquiries from Japanese investors about real-based exchange rates," he revealed.
Indeed, there have been a number of notable positive signifiers surrounding the Brazilian economy recently. Bloomberg data showed that the real climbed 33 per cent against the dollar and gained 36 per cent against the yen in 2009. It also advanced against all of its 16 major counterparts in that year.
Meanwhile, HSBC analysts have said that the currency’s "ongoing under-performance has improved its relative valuations and market positioning significantly", the Wall Street Journal reported. This has made the real "increasingly attractive for a correction", the analysts were reported to have said in a recent research note.
Talking about the South American country’s currency in general, Mark Bodega, director of currency specialists HiFX, said: "Brazilian real exchange rates change constantly and ten per cent fluctuations in a relatively short space of time are not uncommon. This could effectively increase, by ten per cent or more, the sterling amount that you will have to pay."
He gave a number of examples of this fluctuation, with the real having reached 3.42 to the British pound in late February 2009 and sterling then steadily depreciating against the Brazilian Real to reach a low of 2.73 towards the back end of September.
This was when "investors rushed to the real as Latin America’s largest nation effectively shrugged off the worst effects of the world economic slowdown, thanks to the buoyancy and size of its domestic market", Mr Bodega explained. At this time, the country also saw continued demand for its commodities, along with sound government policies, such as tax breaks for durable goods and measures to ease consumer and business credit.
Since then, the sterling has recovered somewhat to its current level of 2.967 real for the pound, he added.
Those moving into their Brazilian property hoping to manage their funds effectively may come across a number of stumbling blocks, however. For instance, anyone who wants to open a bank account in the country will need to be present in the branch and will need to have a number of documents with them.
To receive international transfers in Brazil, the beneficiary or a legally-authorised representative needs to sign a foreign exchange contract at the branch, agreeing to the conversion rate before the local currency equivalent of an international transfer is credited to the relevant account, HSBC notes.
Moneycorp also has a number of warnings about exchanging currency. Firstly, the Brazilian real is a restricted currency, meaning that reals cannot be sent into the country. Instead, foreign funds need to be sent before being converted on arrival into Brazil.
On top of this, funds sent over need to be registered with the Central Bank of Brazil. If this is not done then people may have to deal with problems in repatriating the money.
Fortunately, Moneycorp is one company that can help with such issues. Its currency dealers will talk people through the transfer process step by step and will look to make sure people get the best rates available. The organisation will also fix the Brazilian real rate of exchange, so customers will know exactly how many reals will be delivered. It also ensures each trade will be registered with the Central Bank.
Besides, those moving into Brazilian property needn’t be too concerned about managing finances in the country, as HSBC spokesperson Tim Pie comments: "Brazil has a modern banking system with services that will be very familiar to UK residents who plan to move there and opening an account is straightforward provided you have the required documentation."
