Plano Real

The Plano Real was a set of measures that have been taken to stabilize the Brazilian economy in early 1994, under the direction of Fernando Henrique Cardoso as Minister of Finance, during the presidency of Itamar Franco.

Its architects were among many others PERSIO Arida, André Lara Resende, Edmar Bacha, Gustavo Franco, Pedro Malan, Winston Fritsch and Francisco Pinto.

According to Economic academics one of the causes of inflation in Brazil was the phenomenon of inertial inflation. The prices were adjusted daily on the basis of price indices and the exchange rate of the local currency against the U.S. dollar. Plano Real then created an invoice currency, the Real Unidades de Valor ( URV ), whose value was set at about U.S. $ 1. All prices were given in two currencies, Cruzeiro Real and URV, but payments could only be carried out in Cruzeiro reais. Prices that were specified in the URV, did not change, while their counterparts in Cr $ reais increased nominally every day.

The Plano Real founded his actions on an analysis of the main cause of inflation in Brazil after the military dictatorship, which concluded that there was a problem with both of budgetary policy as well as with strong, widespread inflation inertia.

The Plano Real intended, the nominal value of the currency, after a series of failed plans to stabilize inflation. He created the Real Unidades de Valor ( " real value unit " ), which serves as a key step in implementing the current currency, the real served.

The Plano Real led on 1 July 1994 a new currency, the real, to stabilize as part of a broader plan, the Brazilian economy. The short-lived Cruzeiro Real was exchanged in this process.

The Real won initially in value against the U.S. dollar as a result of large capital inflows in late 1994 and 1995. Then began a gradual impairment process that culminated in the Brazilian currency crisis of January 1999, when the Real suffered a maximum devaluation and fluctuated strongly. Following this period of a quasi- fixed exchange rate (1994-1999) inflationsbekämpfende a policy from the new central bank president Arminio Fraga was introduced, which meant in practice that the period of the fixed exchange rate was over. But the currency was never really free, described in more detail it was a controlled or "dirty " floating currency ( engl. "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 the management of the balance of payments, positive first by setting the real to a very high value relative to the U.S. dollar, and later ( end of 1998 ) by a sharp increase in domestic interest rates, a inflow of foreign capital to maintain the bond markets in local currency in order to finance the Brazilian edition.

The Plano Real acquired partly practices and ideas of the Washington Consensus '.