In recent days the name of the Brazilian Finance Minister, Fernando Haddad,was once again considered a candidate for the Presidency of the country in the 2026 election.
The rumor was even stronger just when there were only a few days left until the date that marks the 30th anniversary of the Real Plan. The plan was presented on July 1, 1994 and changed Brazilian history to the point that young people under 30 today do not know what it means to live with high inflation.
“Is it true that prices used to go up more than once a month?” I heard from my niece, who is in her early 20s. Yes, it is true. And prices could even go up more than once a day during the hyperinflation of the 1980s. There was a time when daily inflation (around 2.5%) was almost equal to the annual inflation of recent times (around 3%) in the country.
It was also more difficult to get credit to buy a house, the salary disappeared quickly from the wallet and the interest rates were exorbitant. The rates were so out of control that I remember when a friend had to sell her car to pay the bills she had on her credit card and finally get rid of the debt that kept increasing.
Everything was a mess and it was very difficult to save money, to plan their financial lives, to prosper economically. There is still a long way to go to achieve the ideal in such an unequal country and when President Lula is increasingly showing himself to be impatient with the president of the Central Bank, Roberto Campos Neto, who was elected during Bolsonaro’s time.
But a lot, a lot has changed since the stabilization of the economy and the fight against the ‘dragon of inflation’, as we said. Stability, predictability attracted investments and at the same time opened up the possibility of organizing daily life in the short and long term.
The changes
Since July 1, 1994, when the Real began to circulate in the Brazilian economy, much has changed, although stability is constantly being monitored and today there is concern about inflation, although nothing that compares to the times before the Real.
Currently, the official inflation target for the Broad National Consumer Price Index (IPCA) is 3% per year, with a tolerance of 1.5% more or less, every three years. But, starting next year, according to the newspaper Economic valuethe National Monetary Council (CMN) will no longer decide the inflation target for a period of only three years and the ‘continuous inflation target’ comes into effect, with an even longer term perspective. The goal is even greater predictability that actually.
To illustrate. Inflation had been 4,922% in the 12 months until June 1994. In 1995, inflation was 25%.
Former Finance Minister Fernando Henrique Cardoso and his team had the political support of President Itamar Franco’s government, parliamentarians and economists to implement the Real Plan. Political support was decisive.
For those who studied the success of the Real Plan, the creation of the ‘Reference Value Unit’ (URV), a virtual currency that ended price indexation, was also fundamental in technical terms, in addition to fiscal and monetary reforms, stabilization measures, the introduction of the Real as a currency and an exchange rate anchor, and the end of measures that had no longer worked, such as price freezes and even the confiscation of Brazilians’ savings, during the government of former President Fernando Collor de Mello, the first to be elected by popular vote after the military dictatorship.
The duel between Lula da Silva and Fernando Henrique Cardoso
On the day of the presentation of the Real Plan, former President Cardoso, who had left the Ministry of Finance to be able to campaign, and the current President Luiz Inácio Lula da Silva were contesting the presidential election in 1994.
Lula was far ahead in the polls, but The Real, with inflation slowing, was crucial to Cardoso’s electionHe had two consecutive terms (1995-2003), Lula was elected and re-elected (2003-2011) and the two had moments of distancing. However, Cardoso declared his support for Lula because he was against Bolsonaro’s re-election.
It all seems like history now. But it is not, because they are the pillars of what we are experiencing today, economically and, in some ways, also politically. Polarization continues in Brazil. And sectors of Lula’s party, the Workers’ Party (PT), and other left-wing groups are critical of the Cardoso governments, but nevertheless, much more critical of Bolsonaro.
Last Monday, Lula, 78, was in Sao Paulo to embrace Cardoso on his 93rd birthday. The official photo of the meeting shows them smiling and friendly. The two have known each other since the 1970s, during the Brazilian military dictatorship. There is mutual respect between them and they were – and are – important for the direction of the country’s politics and economy.
Haddad, 61, said he does not intend to seek the presidential seat at the Planalto Palace again – at least for now, one might add. The presidential election will be held in October 2026.
Haddad, like former president Cardoso, is an academic who made the choice for politics. Former mayor of São Paulo, Haddad was a candidate for Planalto when Lula was banned by the Brazilian justice system. Haddad lost to Bolsonaro in 2019. In the following election, when Lula ran against Bolsonaro, Haddad was the one who presented him with the suggestion of the former governor of São Paulo, Geraldo Alckmin, his political adversary, for Lula’s vice-president, as revealed in a report by O Globo that week. Cardoso and Alckmin were the first to join the now weak PSDB party. Polarization, as in other parts of the world, swallowed up the centrist parties in Brazil.
In this year of 2024, there are municipal elections to elect more than 5 thousand mayors in the country. The dollar has skyrocketed in recent days and the Real lost value. The Brazilian currency, which was already worth the same as the American bill, was quoted at 5.50 on Friday. There is turbulence, there is criticism because Lula is facing the president of the Central Bank, there is (twisted) Bolsonarist support against Lula’s government because they want to see some ally of Bolsonaro – such as the governor of São Paulo, Tarcisio de Freitas – in the Planalto. But, nothing is like it was 30 years ago. At least economically.