What is TR?
According to AbbreviationFinder, the Reference Rate (TR) is a reference interest rate widely used as an indicator for contracts or financial assets. This rate is calculated by the Central Bank of Brazil.
The TR emerged as a reference for interest rates in the Brazilian economy, being one of the instruments for controlling inflation. It was created during the Collor government in 1991, integrating a set of measures adopted by the “Collor II Plan”.
At the time it was created, the country was experiencing very high inflation and many contracts and investments indexed this inflation, generating even higher prices. TR was one of the ways the government of the time tried to use it so that the economy would no longer rely on such high rates.
Currently, TR is used more for the profitability of some financial investments, such as savings accounts or Treasury bills. TR is also used in monetary restatement of loans and FGTS.
Current Value of Reference Rate
The current and last years values calculated for the TR of each month, as well as the accumulated in the year, can be seen in the table below:
| Table TR (%) | ||||||||
| Month year | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
| January | 0.0000 | 0.1126 | 0.0878 | 0.1320 | 0.1700 | 0.0000 | 0.0000 | 0.0000 |
| February | 0.0000 | 0.0537 | 0.0168 | 0.0957 | 0.0302 | 0.0000 | 0.0000 | 0.0000 |
| March | 0.0000 | 0.0266 | 0.1296 | 0.2168 | 0.1519 | 0.0000 | 0.0000 | 0.0000 |
| April | 0.0000 | 0.0459 | 0.1074 | 0.1304 | 0.0000 | 0.0000 | 0.0000 | 0.0000 |
| May | 0.0000 | 0.0604 | 0.1153 | 0.1533 | 0.0764 | 0.0000 | 0.0000 | |
| June | 0.0000 | 0.0465 | 0.1813 | 0.2043 | 0.0536 | 0.0000 | 0.0000 | |
| July | 0.0209 | 0.1054 | 0.2305 | 0.1621 | 0.0623 | 0.0000 | 0.0000 | |
| August | 0.0000 | 0.0602 | 0.1867 | 0.2545 | 0.0509 | 0.0000 | 0.0000 | |
| September | 0.0079 | 0.0873 | 0.1920 | 0.1575 | 0.0000 | 0.0000 | 0.0000 | |
| October | 0.0920 | 0.1038 | 0.1790 | 0.1601 | 0.0000 | 0.0000 | 0.0000 | |
| November | 0.0207 | 0.0483 | 0.1297 | 0.1428 | 0.0000 | 0.0000 | 0.0000 | |
| December | 0.0494 | 0.1053 | 0.2250 | 0.1849 | 0.0000 | 0.0000 | 0.0000 | |
| Accumulated in the year | 0.1910 | 0.8592 | 1.7954 | 2.0125 | 0.5967 | 0.0000 | 0.0000 | 0.0000 |
For previous years, and since the creation of the TR in 1991, the values that have accumulated within each year appear in this table:
| Table TR – annual accumulated values (%) | |
| Year | Annual TR rate (%) |
| 2011 | 1.2079 |
| 2010 | 0.6887 |
| 2009 | 0.7090 |
| 2008 | 1.6348 |
| 2007 | 1.4452 |
| 2006 | 2.0377 |
| 2005 | 2.8335 |
| 2004 | 1.8184 |
| 2003 | 4.6485 |
| 2002 | 2.8023 |
| 2001 | 2.2852 |
| 2000 | 2.0962 |
| 1999 | 5.7295 |
| 1998 | 7.7938 |
| 1997 | 9.7849 |
| 1996 | 9.5551 |
| 1995 | 31.6207 |
| 1994 | 951.19 |
| 1993 | 2474.73 |
| 1992 | 1156.22 |
| 1991 | 335.51 |
The Reference Rate is controlled by the Central Bank of Brazil and has remained at zero in recent years, as shown in the table.
It is worth remembering that if you need to update or correct a value with the TR, you can use the calculator offered by the Central Bank.
How TR is calculated by the Central Bank
The reference rate is defined by the Central Bank of Brazil (BACEN). To calculate the TR, the municipality is based on the interest rates of the National Treasury Bills traded on the government bond market.
Of these interest rates, Bacen calculates a weighted average and obtains a rate known as the Basic Financial Rate (TBF).
Before calculating the Referential Rate, the formula uses a reducer that is calculated as:
- R = a + b × (TBF ÷ 100)
Where “a” is equal to 1.005 and the value of “b” is defined according to the value of the annualized TBF:
| TBF (% aa) | “B” value |
| Greater than 16.0 | 0.48 |
| Less than or equal to 16.0 and greater than 15.0 | 0.44 |
| Less than or equal to 15.0 and greater than 14.0 | 0.40 |
| Less than or equal to 14.0 and greater than 13.0 | 0.36 |
| Less than or equal to 13.0 and greater than or equal to 10.5 | 0.32 |
| Less than 10.5 and greater than or equal to 10.0 | 0.31 |
| Less than 10 and greater than or equal to 9.5 | 0.26 |
| Less than 9.5 | 0.23 |
With the calculated reducer, Bacen defines the TR through the formula:
- TR = [(((1 + TBF ÷ 100) ÷ R) – 1] x 100%
For this formula a maximum between zero and the value calculated by the formula with up to when decimal places is considered. Therefore, if the result is negative, the TR will be considered as zero.
How TR is used
The Referential Rate is widely used for monetary restatement or incorporated in financial investments. Among the most common examples are the savings account and the Severance Pay Fund (FGTS).
In savings, the TR is added to the Selic rate to define the return on financial investments. For those who deposited in the passbook before May 3, 2012, the assigned income is 0.5% per month plus the TR. After that date, the government changed the rule to the following conditions:
- If the Selic rate is above 8.5% per year, savings income is set at 0.5% per month plus TR;
- If the Selic rate is equal to or below 8.5% per year, the savings income corresponds to 70% of the Selic rate plus TR.
In the case of FGTS, the correction is made by adding a fixed amount of 3% per year. When the TR is zero, the fund receives only a 3% correction. In addition to this amount, the FGTS receives as earnings the profits obtained from the management of the fund.
In capitalization bonds, TR is also present, being the only rate that carries out monetary correction in this application.
Tunneling
Tunneling is a type of financial fraud performed in companies. The operation consists of the manipulation of assets and profits by a majority shareholder or senior executive, whose purpose of the action is to increase his personal gain.
A common example of tunneling is the sale of portions of the company at a very low price to another company, which usually has the same members on its board of directors, or family members of these and others who lend their names to avoid taxes and fees and / or legal issues related to the de facto buyer.
This type of resource is generally used for tax reasons or to manipulate the stock market.
The term was first used in the Czech Republic in the 1990s, a period when the local banking system collapsed. Many financial institutions were going bankrupt, and it turned out that the owners of these companies passed much of their corporate equity on to other companies, most of them offshore.