3 ms·
The reason why the real didn't lose value immediately was because for a very long time you could always exchange it for USD 1:1. So there was no reason to get
by dalmo3 5y ago
The reason why the real didn't lose value immediately was because for a very long time you could always exchange it for USD 1:1.
So there was no reason to get rid of (i.e. devalue) it, neither for Brazilians nor external investors.
That was achieved via huge dollar reserves and tight money supply. The government had been accumulating USD to point they had ~4x as much of it in reserves than all reais in the economy (M1) when the real was launched.
Brazilians were used to price things in dollars, and saved dollars whenever they could for obvious reasons. They had been forced to adopt new currencies in the past which immediately lost value as you suggested. When they were forced to adopt this new currency which was provably as valuable as the dollar, people understood that it was safe to stop raising prices.
Of course the dollar reserves wouldn't last forever and a few years later that policy gave way to other measures, but it was a decent starting point.
A very good, very long view (in Portuguese): https://www.mises.org.br/article/1294/uma-breve-historia-do-plano-real-aos-seus-18-anos https://www.mises.org.br/article/1294/uma-breve-historia-do-...
- jalbertoni 5y agoAh yes, what a good article; The one time the Brazilian Mises Institute admitted a leftist position in politics was right because it fixed a problem right-wing-economy politicians made it worse over the last decade. One can genuinely laugh at how far they try to push a pro-huge-corporation view in the article, only to say the opposite two paragraphs later, blessing government regulations for fixing the economy.
- dalmo3 5y agoAustrians like sound money. Backing your currency by a strong global currency that you can't print goes very much in that direction. It's akin to the US going back to the gold standard. I'm not sure what's "leftist" in that. > they try to push a pro-huge-corporation view in the article, only to say the opposite two paragraphs later, I didn't see any "pro-huge-corporation view" in the article. From your username I assume you read the original, not a translation. I might be wrong, and you can prove it by quoting the article if you want to have the last word - I'm not interested in continuing this particular thread.
- ulzeraj 5y ago> The one time the Brazilian Mises Institute admitted a leftist position in politics was right because it fixed a problem right-wing-economy politicians made it worse over the last decade. I see nothing wrong with that. People should like ideas not politicians or institutions. I feel sorry for people who dislike a good action just because they disagree with the person or institution that created it.
- jiofih 5y agoThat’s exactly his point - berating things because of their origins is this institute’s approach 99% of the time.