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  • Brazil Fights Real Battle Against Hyperinflation

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    Adham Nurjati
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    In 1994, Brazil had an extremely high inflation rate of nearly 50% per month, which caused economic collapse and deterred investment. The Real Plan introduced in 1993 and implemented in 1994 by Finance Minister Cardozo, who later became president, successfully stabilized the currency and stopped hyperinflation, attracting more investment. By 1997, inflation had fallen to 7% annually. However, the 1997 Asian financial crisis caused investors to withdraw $10 billion from Brazil in two weeks, believing the currency was overvalued. Brazil also had a large current account deficit as imports exceeded exports, forcing the government to raise interest rates to 43% to reduce imports.

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    In 1994, Brazil had an extremely high inflation rate of nearly 50% per month, which caused economic collapse and deterred investment. The Real Plan introduced in 1993 and implemented in 1994 by Finance Minister Cardozo, who later became president, successfully stabilized the currency and stopped hyperinflation, attracting more investment. By 1997, inflation had fallen to 7% annually. However, the 1997 Asian financial crisis caused investors to withdraw $10 billion from Brazil in two weeks, believing the currency was overvalued. Brazil also had a large current account deficit as imports exceeded exports, forcing the government to raise interest rates to 43% to reduce imports.

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    74 views2 pages

    Brazil Fights Real Battle Against Hyperinflation

    Uploaded by

    Adham Nurjati
    In 1994, Brazil had an extremely high inflation rate of nearly 50% per month, which caused economic collapse and deterred investment. The Real Plan introduced in 1993 and implemented in 1994 by Finance Minister Cardozo, who later became president, successfully stabilized the currency and stopped hyperinflation, attracting more investment. By 1997, inflation had fallen to 7% annually. However, the 1997 Asian financial crisis caused investors to withdraw $10 billion from Brazil in two weeks, believing the currency was overvalued. Brazil also had a large current account deficit as imports exceeded exports, forcing the government to raise interest rates to 43% to reduce imports.

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    © All Rights Reserved
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    of 2

    MULTINATIONAL FINANCE

    Case 2 : Brazil Fights a Real Battle

    Group 2 :

    ADHAM NURJATI

    FATMA HAULIDA RAHMAH

    MARIA FRANCISCA OKTAVIANI

    MAGISTER MANAJEMEN

    FAKULTAS EKONOMIKA DAN BISNIS

    UNIVERSITAS GADJAH MADA

    2017
    Key Issues

    In 1994, Brazil inflation rate was high, nearly 50% per month, that condition made
    Brazilian economy almost collapse, and investors did not interest to investing. Hyperinflation
    made Brazil society more likely to import than export. Cardozo introduced the "Real Plan" in
    1993 while he was a finance minister. Cardozo was elected as a president in 1994 and made a
    real pan to stabillize the currency. Real plan managed to stop hyperinflation and attract investors
    to invest. Real plan succeded reducing the inflation rate in Brazil, but the inflation rate was very
    low. In October 1997 inflation rate of Brazil was 7% per year. President Cardozo managed to
    raise BOLZA ( capital market in Brazil) by 158% since 1994. In the same year, there was a crisis
    economic in Asia, that impact the economic in Brazil, investors assume that government policies
    in Brazil about the currency made that over value in Brazil and investors left Brazil which is
    reflected from the revocation of $ 10 billion in two weeks by investors. In addition, Brazil's
    condition had a current account deficit whereby Brazil imports more than exports. Seeing the
    phenomenon that the Brazilian government increased interest rates to 43% to reduce imports.

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