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Brazilian currency is the Real.

In Brazil, it is illegal to pay bills using dollars or other foreign currency.
Currency must be exchanged to Reais at banks (including ATMs, see below) or at offices authorized by the Central Bank; however, although illegal, the exchange of small amounts of dollar at hotels, restaurants and shops is common (avoid exchanging money with individuals who approach you offering a better rate).
Every citizen bringing more than the equivalent to R$ 10,000.00 (ten thousand reais) in cash must declare it by filling a form upon arrival.

The usage of international credit cards in Brazil is widespread practice. Most common cards are Visa, Mastercard, American Express and Diners.
Thanks to years of high inflation, the banks of Brazil developed an excellent technological infrastructure; there are ATMs in most touristic spots, and many online transactions are available, including cashing credit cards.
The major Brazilian banks (like Banco do Brasil, Bradesco, Itau, etc) allow cash withdrawals using credit cards. These transactions are legal, fast, safe and usually have a good exchange rate. Notice that not all banks, and not all ATMs, allow withdrawals; ask the bank staff for more information.

Exchange rate

In Brazil, there are two different exchange rates: the commercial rate, used by exporters and importers, and the tourism rate, used by the banks to buy dollars from and sell dollars to tourists.
This page by newspaper O Globo shows the course of the commercial dollar for the past three months. In the tourist market, there is no official course; dollars are purchased from tourists for a rate lower than the commercial, and are sold to tourists for a rate higher than the commercial.

In 2006 and 2007, the dollar lost value against the Real. In 2002, when the financial markets were uncertain about the guidelines of then new President Lula, the dollar reached a peak of about US$ 1 = R$ 4. Since then, as President Lula has been adopted conventional economic politics (as opposed to the anti-capitalist politics he used to preach before being elected), the Real has only gained value.
In the first half of 2007, for the first time in a long period, the dollar fell below R$ 2. Analysts say that a slight valuation of the dollar is possible, but in the near future the rate should not go much above R$ 2.

From 2007 until 2012, the Real remained strong against the dollar and the euro.
Brazil is attracting massive amounts of foreing investments, which has been keeping the Real strong.

For tourists who visited Brazil in 2002, the impression is that the country is much more expensive now. However, Brazil still remains a country with low cost of living, compared to Europe and North America.

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