The Plano Real and the Global Crisis
The Plano Real and the Global Crisis
Stanley Martins Frasão
The Provisional Measure[1] 542, of June 30, 1994, ratified afterwards by several others, was converted into the Law 9.069/95, which ruled on the Plano Real and, among other things, established regulations for the transition from Cruzeiro Real, the URV and the Real, especially concerning the conversions of obligations.
The aforementioned Provisional Measure altered the currency of the country, commanded the writing in Real of all pecuniary expressions that translated into the national currency, fixed the parity between the Real and the Cruzeiro Real, and between the URV and the Real.
The Program of Economic Stability, or Plano Real, is considered the best in combating inflation, among others launched in recent times.
More accurately we continue in search of economic stability, for Brazilian inflation, according to the IBGE, measured by the IPCA (families with monthly incomes within 1 to 40 minimal wages), presents the following evolution, not counting the periods of price freezes:
1,990 (1,620.97), 1,995 (22.41), 2,000 (5.97), 2,005 (5.69)
1,991 (472.69), 1,996 (9.56), 2,001 (7.67), 2,006 (3.14)
1,992 (1,119.09), 1,997 (5.22), 2,002 (12.53), 2,007 (4.46)
1,993 (2,477.15), 1,998 (1.65), 2,003 (9.30), 2,008(until Nov.) (5.61)
1,994 (916.46), 1,999 (8.94), 2,004 (7.60)
The global crisis has generated worries of all sorts to everyone, causing the devaluation of the Brazilian currency against the dollar. The currency reflects the soul of its people. Consider the American example. The sum of the forced course and the public confidence in the government that mints the currency allowed the transition of the metal currency to the nominal concept, separated from its metallic element, when Nixon completely eradicated the gold standard in 1971. Since then the dollar was worth only by force of the trust of American citizens and other countries in the United States economy.
The Plano Real recovered people’s trust in the economy and the government, and since 1990 the Brazilian currency was embodied in the “dollar-standard”.
The government, the Plano Real, started to control an instrument capable of eradicating inflation from our economy, but we should not ignore the “Francomano of law”, because those who spend more than they earn and are indebted more than they can shall lose their independence, soul, and shall mortgage their future. If the State does not apply the wise Italian Law it will foment inflation, allowing the corrosion of the currency, and consequently the loss of trust from the people, which will allow all sorts of uncertainties to emerge.
The future, of course, is unknown. But the eternal and resistible Brazilian hope lessens the uncertainty that we will never have a devaluation in the currency comparable to the year of 1989, when it reached 1,765%.
[1] In Brazilian Constitutional Law, a Provisional Measure (Medida Provisória) is adopted by the President without the participation of the Legislative. It has the force of a law, but it is not a law until it is approved by Congress.
Stanley Martins Frasão
The Provisional Measure[1] 542, of June 30, 1994, ratified afterwards by several others, was converted into the Law 9.069/95, which ruled on the Plano Real and, among other things, established regulations for the transition from Cruzeiro Real, the URV and the Real, especially concerning the conversions of obligations.
The aforementioned Provisional Measure altered the currency of the country, commanded the writing in Real of all pecuniary expressions that translated into the national currency, fixed the parity between the Real and the Cruzeiro Real, and between the URV and the Real.
The Program of Economic Stability, or Plano Real, is considered the best in combating inflation, among others launched in recent times.
More accurately we continue in search of economic stability, for Brazilian inflation, according to the IBGE, measured by the IPCA (families with monthly incomes within 1 to 40 minimal wages), presents the following evolution, not counting the periods of price freezes:
1,990 (1,620.97), 1,995 (22.41), 2,000 (5.97), 2,005 (5.69)
1,991 (472.69), 1,996 (9.56), 2,001 (7.67), 2,006 (3.14)
1,992 (1,119.09), 1,997 (5.22), 2,002 (12.53), 2,007 (4.46)
1,993 (2,477.15), 1,998 (1.65), 2,003 (9.30), 2,008(until Nov.) (5.61)
1,994 (916.46), 1,999 (8.94), 2,004 (7.60)
The global crisis has generated worries of all sorts to everyone, causing the devaluation of the Brazilian currency against the dollar. The currency reflects the soul of its people. Consider the American example. The sum of the forced course and the public confidence in the government that mints the currency allowed the transition of the metal currency to the nominal concept, separated from its metallic element, when Nixon completely eradicated the gold standard in 1971. Since then the dollar was worth only by force of the trust of American citizens and other countries in the United States economy.
The Plano Real recovered people’s trust in the economy and the government, and since 1990 the Brazilian currency was embodied in the “dollar-standard”.
The government, the Plano Real, started to control an instrument capable of eradicating inflation from our economy, but we should not ignore the “Francomano of law”, because those who spend more than they earn and are indebted more than they can shall lose their independence, soul, and shall mortgage their future. If the State does not apply the wise Italian Law it will foment inflation, allowing the corrosion of the currency, and consequently the loss of trust from the people, which will allow all sorts of uncertainties to emerge.
The future, of course, is unknown. But the eternal and resistible Brazilian hope lessens the uncertainty that we will never have a devaluation in the currency comparable to the year of 1989, when it reached 1,765%.
[1] In Brazilian Constitutional Law, a Provisional Measure (Medida Provisória) is adopted by the President without the participation of the Legislative. It has the force of a law, but it is not a law until it is approved by Congress.
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