Plano Real
The Plano Real was a set of measures taken to stabilize the Brazilian economy in early 1994, under the direction of Fernando Henrique Cardoso as Minister of Finance, during the Itamar Franco presidency .
Its architects included Pérsio Arida , André Lara Resende , Edmar Bacha , Gustavo Franco , Pedro Malan , Winston Fritsch and Francisco Pinto , among others .
According to business academics, one of the causes of inflation in Brazil was inertial inflation . The prices were adjusted daily based on price indices and the exchange rate between the local currency and the US dollar. Plano Real then created a currency of account, the Unidade Real de Valor (URV), which was valued at approximately $ 1. All prices were quoted in two currencies, Cruzeiro Real and URV, but payments could only be made in Cruzeiros Reais. Prices quoted in URV did not change, while their counterparts in Cruzeiros Reais increased nominally each day.
The Plano Real based its actions on an analysis of the main cause of post-military inflation in Brazil , which concluded that there was a problem with both fiscal policy and strong, widespread inertial inflation .
The Plano Real intended the face value of the national currency , after a series of failed plans to stabilize inflation . He created the Unidade Real de Valor ("real unit of value"), which served as a key step in implementing the current currency, the real .
The Plano Real introduced a new currency, the Real , on July 1, 1994 , as part of a broader plan to stabilize the Brazilian economy. The short-lived Cruzeiro Real was exchanged in the process.
The real initially appreciated against the US dollar as a result of the large influx of capital in late 1994 and 1995. Then began a gradual depreciation process that culminated in the Brazilian currency crisis of January 1999, when the real suffered a maximum devaluation and fluctuated sharply. Following this period of a quasi-fixed exchange rate (1994–1999), an anti-inflation policy was introduced by the new central bank president Arminio Fraga, which practically meant that the period of the fixed exchange rate was over. But the currency was never really free, more precisely described it was a controlled or "dirty" floating currency (English " dirty float ") with frequent interventions by the central bank to manipulate its dollar exchange rate.
The Plano Real was also characterized by a strong focus on balance of payments management , first by setting the real to a very high value relative to the US dollar , and later (late 1998) by sharply increasing domestic interest rates to a positive one Maintain influx of foreign capital to bond markets in local currency to fund Brazilian spending.
The Plano Real partially adopted the procedures and ideas of the Washington Consensus .