Two Months After Launch, Brazilian Economy Minister Says R$200 Banknote Should Be Short-Lived

RIO DE JANEIRO, BRAZIL – Less than two months after the Central Bank officially launched the new R$200 (US$40) banknote, Minister of Economy Paulo Guedes conceded on Thursday, October 29th, that the introduction of a higher-value banknote occurred in contrast to what other countries have done and projected that the new banknote will have a short lifespan in Brazil.

“We designed a R$200 banknote with a maned wolf because we had a logistic problem to pay the emergency aid. With the PIX (Central Bank’s new instant payments system), the future is one of less cash in hand and simpler bills. In the future the maned wolf will end, the R$200 and the R$100 banknotes. Soon the maned wolf will retire, it will have a short career,” he said in a public hearing at the National Congress Joint Committee for the monitoring of measures against Covid-19.

A total of 450 million bills will be printed this year, which will represent an amount of R$90 billion to the public coffers. According to the Central Bank, the new banknote production cost is R$325 per thousand bills. By comparison, the R$100 bill costs R$280 for every thousand banknotes produced.

In his Estadão column, Gustavo Franco, ex-president of the Central Bank, criticized the launching of the new banknote. He mentions a 2015 report by Kenneth Rogoff in the United States that shows that there is a massive amount of paper money in circulation in the US, corresponding to something like US$4,200 per person (including children) and 78 percent of that amount would be retained in US$100 bills. But these US$100 banknotes would be concentrated in the world of informality or crime.

In transporting Rogoff’s statement for Brazil, Franco says that there is something like R$1,098.7 per capita (including children) in banknotes, about half of which would be in R$100 bills (about 90 percent in R$50 and R$100 banknotes), which is very similar to the American result. The higher value bills are not accessible to the majority of the population.

According to Franco, an ECB (European Central Bank) survey of users showed that 56 percent of the sample had never seen the 500-euro banknote and that it ceased to be manufactured in 2019 (but was not collected or demonetized).

Source: O Estado de S. Paulo