Plano Real

From Freepedia

The Plano Real (Portuguese, Real Plan) was a set of measures taken to stabilize the Brazilian economy in the early 1990's, under the direction of Fernando Henrique Cardoso as the Minister of Finance.

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

The Plano Real based its actions on an analysis of the root causes of inflation in the post-military dictatorship Brazil that concluded that there was both an issue of fiscal policy and severe, widespread inertial inflation.

The Plano Real intended to stabilized the domestic currency in nominal terms after a string of failed plans to control inflation. It created the Unidade Real de Valor (Real Unit of Value), which served as a key step to the implementation of the current currency, the real.

It also was characterized by a strong focus on the management of the balance of payments, at first by setting the Real at a very high value relative to the US dollar and later (late 1998) by a sharp increase on domestic interest rates to maintain a positive influx of foreign capitals to local currency bond markets, financing Brazilian expenditures.

The Plano Real partly incorporated policies and ideas from the Washington Consensus.