The Brazilian inflation and the “Real Plan”

ABSTRACT By most standards, Brazilian inflation has been the most intractable in world history. The time span of high Brazilian inflation is unparalleled: inflation has exceeded 50 percent per annum every year since 1979 and has been at double digit rates every year since 1957. Even Argentina, the perennial rival of Brazil for the dubious distinction or longest-running high inflation, has achieved price stabilization since April 1991. There have been innumerable major and minor attempts at Brazilian stabilization, including at least five major “Plans” since 1986. Each has failed. Brazil is currently in the midst of another major stabilization attempt, the Plan Real. This paper assesses the difficulties inherent in Brazilian stabilization programs, and the prospects for the Plan Real, including its particular motivations and its chances for success.