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 longestrunning
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.

JEL Classification: E31; E52.