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1 July 1994General source · 2 sourcesWell documented

The Real Plan Defeats Hyperinflation

A new currency in 1994 ends years of runaway prices and remakes Brazilian politics

On the timeline · around 1 July 1994 · Modern BrazilModern BrazilThe Real Plan Defeats Hyperinflation197019801990200020102020

Quick facts

Launched
July 1, 1994 (new currency, the real)
Inflation before
757 percent in the first half of 1994
Inflation after
18.6 percent in the following half-year
Architect
Finance Minister Fernando Henrique Cardoso

What happened

Democratic Brazil's first great achievement was killing inflation. Prices had spiraled for years, reaching 757 percent in just the first half of 1994. The Plano Real, launched under President Itamar Franco with Fernando Henrique Cardoso as finance minister, used a virtual accounting currency, the Unidade Real de Valor, to reset expectations before introducing a new money. The Brazilian government's news service records that on July 1, 1994, a new currency was brought into force in Brazil: the real, putting an end to the hyperinflation, after which inflation plummeted to 18.6 percent in the following half-year. Cardoso rode the plan's success to the presidency in 1995 and served two terms.

Why it matters

Hyperinflation had punished Brazil's poor hardest and made stable planning impossible; ending it stabilized the economy and lifted incomes, and it reshaped politics by carrying Cardoso to the presidency and setting the stage for the social programs of the governments that followed. The Real Plan is the economic foundation of the modern Brazilian state.

How we know

The July 1, 1994 launch of the real, the pre-plan inflation of 757 percent, and the drop that followed are documented verbatim across two reports from Brazil's official Agencia Brasil news service.

Sources

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