Hyperinflation and the Real Plan
After a decade of inflation that at times exceeded 2,000% a year and several failed plans, a new currency, the real, finally brings prices under control.
- The Brazilian Economy: Growth and Development — Werner Baer, Lynne Rienner (2014)
- Brazil: A Biography — Lilia M. Schwarcz and Heloisa M. Starling, Allen Lane (2018)
- Brazil: Five Centuries of Change — Thomas E. Skidmore, Oxford University Press (2010)
The 1980s were Brazil’s “lost decade”. Burdened by the dictatorship’s foreign debt, the economy stagnated while prices rose ever faster; annual inflation passed 2,000% in 1993. Supermarket workers re-labelled goods several times a day, and the country changed its currency repeatedly. A series of shock plans failed, the most traumatic being the 1990 Collor Plan, which froze most of people’s savings accounts overnight.
- The Brazilian Economy: Growth and Development — Werner Baer, Lynne Rienner (2014)
- Brazil: A Biography — Lilia M. Schwarcz and Heloisa M. Starling, Allen Lane (2018)
In 1993–94 a team under Finance Minister Fernando Henrique Cardoso tried something cleverer. First prices were indexed to a virtual unit of value, the URV, which people got used to thinking in; then, on 1 July 1994, the URV became a real currency, the real, backed by fiscal tightening and high interest rates. Inflation fell from four figures to single digits within a few years. Cardoso won the presidency that October and governed until 2002, privatising state companies and stabilising the economy, though at the cost of high interest rates, a currency crisis in 1999 and growing unemployment.
- The Brazilian Economy: Growth and Development — Werner Baer, Lynne Rienner (2014)
- Brazil: Five Centuries of Change — Thomas E. Skidmore, Oxford University Press (2010)
Why it matters today
Brazilians who lived through hyperinflation remember rushing to the supermarket on payday before prices changed, and many still keep a fierce vigilance about inflation. The real's success made its architect, Fernando Henrique Cardoso, president, and stable money became the base on which later social programmes were built.