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| Brazilian cruzado | |
|---|---|
| Name | Cruzado |
| Local name | Cruzado brasileiro |
| Iso code | BRC |
| Introduced | 1986 |
| Withdrawn | 1989 |
| Replaced by | Cruzado novo |
| Subunit name | centavo |
| Issuing authority | Central Bank of Brazil |
Brazilian cruzado
The Brazilian cruzado was a short-lived currency unit introduced in 1986 as part of a stabilization plan in Brazil during the presidency of José Sarney. It replaced the cruzeiro at a rate designed to curb hyperinflation and was succeeded by the cruzado novo amid continued monetary turmoil. The currency's life intersected with major political and economic episodes involving actors such as Dilma Rousseff (later Brazilian president), Fernando Collor de Mello (who later implemented reforms), and international institutions like the International Monetary Fund.
The cruzado emerged against a backdrop of persistent inflation that traced roots to the 1973 oil crisis, the late-1970s Latin American debt crisis, and policy shifts during the administrations of Emílio Médici, Ernesto Geisel, and João Figueiredo. Political responses included plans advanced in the cabinets of Tancredo Neves and implementation by José Sarney after the 1985 transition from military rule to civilian governance. Economic teams featured figures from the Ministry of Finance and the Central Bank of Brazil, with influences from economists associated with Getúlio Vargas-era industrialization debates and later heterodox proposals reminiscent of measures in Argentina and Chile. The cruzado was part of a sequence of reform efforts following the Plano Cruzado, which drew attention from analysts at the World Bank and observers in financial centers such as New York City, London, and Tokyo.
Announced by Finance Minister Dilson Funaro and enacted under President José Sarney, the monetary reform replacing the cruzeiro with the cruzado sought to simplify transactions and psychologically reset price expectations. The policy package included wage freezes and price controls inspired by heterodox plans like the Brazilian Miracle era interventions and later compared to plans in Peru and Mexico. The law authorizing the change was debated within the National Congress of Brazil and implemented by the Central Bank of Brazil alongside fiscal adjustments advocated by advisers who had studied programs at institutions such as Harvard University and Massachusetts Institute of Technology. The reform initially reduced nominal figures and required recalibration of accounting in companies like Petrobras and banks including Banco do Brasil and Itaú Unibanco.
Banknotes and coins were issued in denominations intended to facilitate everyday transactions and large-value settlements among firms including Vale S.A. and retailers like Grupo Pão de Açúcar. The minting and printing involved technologies procured from firms active in the international security printing market, and the notes featured imagery resonant with national symbols tied to personalities from the era of Pedro II and cultural references to figures such as Juscelino Kubitschek and landmarks like Brasília. Denominations accommodated centavo divisions, matching accounting practices used by merchants in São Paulo, Rio de Janeiro, and regional centers like Salvador. The design process engaged artists and institutions including the Museu Nacional and consultants experienced in banknote aesthetics who had worked on projects in Spain and Portugal.
Despite initial public optimism fueled by support from sectors connected to Confederação Nacional da Indústria and trade unions affiliated with leaders like Luis Inácio Lula da Silva, the cruzado period saw persistent inflationary pressures. Price controls and wage policies resembled mechanisms used in other Latin American stabilization attempts such as Argentina's Austral plan; however, fiscal deficits, external debt servicing to creditors in Tokyo, Frankfurt, and bondholders in New York Stock Exchange, and commodity price swings for exports like coffee and soy impacted outcomes. Analysts from universities including University of São Paulo and Fundação Getulio Vargas documented pass-through effects, while debates in the Chamber of Deputies and Federal Senate (Brazil) highlighted tensions between austerity advocates and critics favoring structural reforms. By 1989 inflation reaccelerated, undermining the cruzado's intended stabilization.
The cruzado circulated in urban markets, public transportation networks in cities such as Belo Horizonte and Curitiba, and within banking systems like Caixa Econômica Federal. Rapid denomination changes and episodes of currency substitution led to operational challenges for retailers including Lojas Americanas and service providers like Companhia Paulista de Força e Luz. The Central Bank of Brazil eventually announced replacement measures culminating in the introduction of the cruzado novo to regain credibility and simplify accounting. The transition involved coordination with commercial banks, the treasury under ministers including Fernando Henrique Cardoso, and clearinghouses operating in financial districts across Brazil.
The cruzado's short tenure influenced subsequent monetary policy debates in Brazil, informing the design of later stabilization plans including the Plano Real and reforms spearheaded by Fernando Henrique Cardoso and Itamar Franco. Lessons drawn by economists at Universidade Estadual de Campinas and policy institutes like Instituto Brasileiro de Economia shaped approaches to inflation targeting and central bank independence, linking to discussions in international fora such as the Inter-American Development Bank and the International Monetary Fund. The legacy persists in numismatic collections at institutions like the Museu Paulista and in academic treatments published by scholars at Oxford University and University of Chicago studying Latin American monetary history.
Category:Currencies of Brazil