The New Brazilian Foreign Exchange Policy

Walter Douglas Stuber and Ricardo Baraldi Macedo

I - Introduction

The Brazilian government announced on January 18, 1999 its new foreign exchange policy, in an attempt to lower internal interest rates, currently maintained at extremely high levels, and thus spend less in defending the Brazilian currency, the "Real".

After years of rigid foreign exchange control, by means of Communiqué No. 6.565, of January 18, 1999 the Central Bank of Brazil ("Central Bank") stated that it will finally let the Real float freely in relation to other strong currencies. However, Communiqué No. 6.565 stresses that the Central Bank may, occasionally, intervene in the market to limit baseless swings in the value of the currency.