Prices changed drastically, making it difficult to negotiate and maintain contracts
The Central Bank increased its inflation estimate to 4% in 2024, according to the Focus Bulletin released on July 1. In 2023, the Broad Consumer Price Index (IPCA) registered 4.62%. Even with the forecast of an increase for this year, the numbers do not come close to the hyperinflation that has been galloping since the military governments. In 1993, the index reached 2,477%.
Political instability worsened the situation. In 1985, José Sarney became president, while the country mourned the death of Tancredo Neves. Then came Fernando Collor, who won the first direct election after the dictatorship, but did not complete his term.
He was impeached in the streets by the people, outraged by corruption scandals and the hardships of the Collor Plan. With Finance Minister Zélia Cardoso de Mello at the forefront, the package confiscated amounts of over 50,000 new cruzeiros at the time, which were usually kept in banks, usually in savings accounts.
Itamar Franco replaced Collor, who chose Fernando Henrique Cardoso (FHC) as Finance Minister. In FHC’s hands was the hope of a plan that would finally pull the Brazilian economy out of the hole. Centered on price freezes, the economic plans imposed on Brazilians accumulated successive failures and impoverished the less well-off population.
This was the case with the Cruzado and Cruzado II (1986), Bresser (1987), Verão (1988), Collor (1990) and Collor II (1991). Under FHC’s leadership, the Plano Real promoted a gradual transition from the Unidade Real de Valor (URV), which would become the new Brazilian currency. For 30 years, the Real has managed to control prices, easing the despair of families who saw their purchasing power dwindle every day.
Companies in all segments, including advertising, suffered. “Prices changed drastically, making it difficult to negotiate and maintain contracts. Due to the volatility of the economy and the devaluation of the currency, many agreements needed to be adjusted according to the average inflation rate,” recalls Paulo Ramirez, political scientist and sociologist at ESPM.
Read the full article in the July 8th print edition.
