Inflation in Brazil

A short history of inflation in Brazil

The Inflation Years (1980 to 1994)

Brazilian inflation ran into four figures for much of the 1980s and early 1990s, and the country issued five currencies between 1986 and 1994, each shedding the zeros the last had accumulated. Successive stabilisation attempts failed for the same reason: they began by freezing prices, which suppressed the symptom while the deficits causing it continued, so inflation returned as soon as the freeze was lifted.

The Real Plan (1994)

The Real Plan succeeded by reversing the order. From March 1994 prices were quoted in a unit of account, the URV, which was itself repriced against inflation every day, so wages, rents and contracts could migrate onto a stable measure while the old currency still circulated. Only once the economy was denominated in it was the unit converted into a currency, on 1 July 1994. Brazil floated the real in January 1999 and adopted an inflation target that June, and has worked to one since.

Post-Covid Inflation (2021 to 2023)

In Brazil, prices rose fastest in April 2022, at 12.1%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.