Today marks the 25th anniversary of the Brazilian Real. We will talk about how the Brazilian currency helped the country escape inflation, allowed wealth distribution, and gave the country some much-needed economic stability.
- Plus, pro-Bolsonaro demonstrators took to the streets to celebrate Justice Minister Sergio Moro—in demos that were much smaller than last month.
- And President Bolsonaro could fulfill a campaign promise to open up the Brazilian economy. Enjoy the read!
25 years of the Real, the Brazilian currency
The Brazilian Real began circulating on July 1, 1994—the 6th plan in less than ten years to tame inflation. From the early 1980s until that point, Brazil struggled with hyperinflation, which corroded salaries and created many economic distortions.
The successive crises were caused by government overspending, lax regulation of bank loans, and an economy with a high level of indexation. Salaries, taxes, and payments were adjusted according to inflation—which created a snowball effect.
To make the Real work, the Itamar Franco administration reduced the public deficit through severe austerity measures and higher taxes, as well as raising the benchmark interest rate (attracting foreign investors, even if speculative).
The side effect was a loss in the purchasing power of the minimum wage,...