The Real Plan

It was first applied in June 1993 just right a year after president Franco, who was the vice president, got the power from Collor de Mello, who got fired after being involved in a corruption case. At this time, the country was submerged in a really bad crisis with an inflation up 1,119%. It had been like that for almost 30 years.

The economy secretary who promoted this economic plan was Fernando Cardoso and it brought economic stability to the country for the first time in many years. It is with this plan when the protectionism that the state was giving to its economy and to national companies ended. The brazilian economy changed into a more open one and exports of different types of raw materials to countries around the world. Some important companies were privatised in order to balance the accounting plan of the government in that moment were the public debt was really high. From 1992 and all the way to 1995 Brazil achieved a massive reduction of the inflation they had thanks to the foreign capital that was being invested in those years. One important consequence of this reduction was that the currency which at the time was the Cruzeiro changed to the Real that is active now. In the moment of the change, the exchange rate between both currencies was 250 cruzeiros per each Real.

One of the policies that was part of the Real Plan designed by Cardoso and Franco had to do with the deposits that people had in the country. Interests were increased to prevent a massive exit of capital to other countries.

All these measures had a good impact during the first years of the plan but then unemployment started growing as a consequence of the high interest rates applied to companies. National companies were also hurted because of the openism of the the brazilian economy to other countries. These companies could not compete with the international companies that would sell products at a lower price. Furthermore, the Real was devaluating really quickly because investors were losing its confidence in Brazil. in 1998 the situation of the country was so bad bad that they had to be rescued by the FMI with a 40000 million aid. The inflation of the currency rose and the fiscal policies of the FMI had to be applied. In the following years, the growth of the GDP was really small and slow until Lula da Silva was elected as president of the Republic.

This articles were read in order to gather information for this entry:
 http://historiaeconomica97.blogspot.com/2015/11/brasil-comentario-economico-politico_16.html
https://prodavinci.com/como-pudo-brasil-detener-un-proceso-de-inflacion-galopante-cronica-del-plan-real/ 
 https://www.yorokobu.es/real-brasil/