The president's monetary policy vs the dragon. Brazil humorists have a lot of fun with inflation, and the public is always skeptical of their ability to control the dragon. For some reason, inflation is often symbolized as a dragon, just as the income tax is a lion. Anyway, in the cartoon, the dragon is not impressed with the new real currency.
A high inflation rate means you do to bed with $100 in the bank (or in your pocket) and wake up with $98 or 99, and on the next day you have $96, without spending a penny (well, a centavo). It also means when you get paid, you immediately go to the market for groceries and/or stores to purchase any basic goods you may need. This page is about Brazil's battle with the evil dragon viewed though it's paper money .
For most of the early part of then 20th century, Brazil's money was called Reis, meaning "kings". By the 1930s the standard denomination was Mil Reis meaning a thousand kings -- that is alot of blue blood flowing on the market.
By 1942 the currency that devalued so much that the Vargas government instituted a monetary reform, changing the currency to cruzeiros (crosses) at a value of 1000 to 1. Twenty thousand reais bank notes were stamped as twenty cruzeiros, as seen in the example here. Over the next fifty years, the poor stamp overlay machines were to stay busy. As you will notice on this page I have tried to find paper notes "stamped" (carimbadas) with the new values. These notes remained in circulation a few months until the new "official" notes with the new denominations became available.
For the first decade of life, the cruzeiro had a quiet existance, moving along a slow pace against the US dollar. During the JK years, with the building the new capital at Brasilia, the cruzeiro began to lose value at a faster rate. The government has promissed "ten years of progress in five", but critics countered that what happened was "fifty years of inflation in five". Even so the 10-15% per year inflation rate of the late 50s would soon be remember as the "good old times". Even so, the cruzeiro limped along until the military regime took power in 1964. Think what you wnat about the generals, but those guys really knew how to spend!. By 1967 the largest note in circulation was 10,000 cruzeros (see sample) with Santos Dumont, and it had a face value of a little over 3 dollars (I think!). That means you need to carry a lot of paper to buy anything. It wasn't Germany in the 1920s, but it was bad. Probably one of the reaons for not having higher denominations was that all money was either printed by "the American Nank Note Company" (USA) or "Thomas de la Rue (England?). I guess it took to long to get the money into circulation when printed abroad. In was in 1967 that the cruzeiro was renamed to cruzeiro novo (new cruzeiro), and three zeros were dropped from all denominations.
In 1970 the cruzeiro novo was renamed, dropping the "novo" and once again being called simply the cruzeiro. Still inflation raged and more and more paper money flooded the market. Money was now printed in Brazil and it had a different look. Being locally made, it was easier to keep the presses rolling, and roll they did. This was the decade of the "Brazilian Miracle", when foreign bankers were throwing money at Brazil and the economy was growing at 10% a year, although inflation was running anywhere from 15 to 300%. It was under the cruzeiro that the "monetary correction" mechanism was instituted, whereby every month all salaries were aoutomatically adjusted upwards to compensate for inflation. Of course, the official reajustment indexes were almost always less than the real inflation rate, so workers lost earning power. Oh yes, I would like to add that any new drastic fiscal or monetary plan is always called a "pacote", which can be translated as a package or even as a present. Believe me, most people would prefer not to find that kind of package from Brasilia under their Christmas tree. The fact is that the only parties that gain from inflation are the financial institutions (banks) and big government. So if things are so bad that a pacote is announced, it is not (usually) because the leaders in Brasilia are worried about the common people (middle class), but because things have become unsustainable for themselves and they have been forced to act in their own interests.
By the mid 1980s inflation was out of control. The good news is that the military were on the way out and democracy was on its way in. The bad news, however, was that the "civilians" taking over were the old aristocracy from the north and northeast of Brazil (called "coroneis", or coronels after the powerful, traditional land-owners in the region). These presidents (Sarney and Mello) were so corrupt that they made the Generals look good. Anyway, in 1986 Sarney created the Cruzado (crusade) plan, with a new currency at a 1000 to one rate. For about one year it held than the dam broke and all the "hidden" inflationary forces came out with a vengence, making up for lost time. It was at this time they (I don't know who) added the phrase "Deus seja louvado" (God be praised) to all bank notes. Nice thought! Also I noticed that this was the first time they re-used the art and format of the currency note, just changing the values and substituting cruzeiros for cruzados.
Well, more inflation and soon the cruzado was sick, very sick. In 1989, in a brilliant and original move, the government decides to drop three zeros and change the name of the currency to cruzado novo. In 1990, on a slow day in Brasilia, with nothing else to do on a slow Wednesday, the government decides to change the name again. In order to avoid confusion and not associate the new currency with previous monetary policy, they decide upon another innovation: the money will be cruzeiros (hum, sounds familiar!), but there will be no change in the face value (one cruzado novo = one cruzeiro). A new economic team had arrived in Brazilian and had announced new fiscal inti-inflationary measures. At long last, all of Brazil was able to sleep at night, knowing that the bureaucrats in the Banco Central and Conselho Monetario Nacional were taking care of their best intersts.
It was a very hard, sleepless night, I guess. By 1993 the Brazilian Finance Minister and his friends in the treasury (under Presidents Collor and 'Flash' Itamar) had taken care of business so well that it was time for another game of "get rid of zeros and find a name". So the folks in Brasilia got their little heads together and decided as follows: the new currency would be called cruzeiro real (pronounced Ree - al) and each one would be worth one thousand of the old cruzeiros. The largest note in circulation at this time (or maybe anytime in Brazil) was the 500,000 bill seen above. In this way, by changing the currency, they avoided the embarrasment of having 1,000,000 notes which would really make the monetary policy team in Brasilia look like it was incompetent. So we have come full circle - almost: real, cruzeiro, cruzeiro novo, cruzeiro, cruzado, cruzado novo, cruzeiro, cruzeiro real. Obviously someone is helping the "cruzeiro" team. They are way ahead, but the race is not over. I remember it was at this time that a story was filed in the international papers saying that because of the frequent changes in currency and bank note denominations, the Brazilian government was extremely worried because all great men and women of history, art and science had already been figured on paper currency and there was nobody famous left to put one the new bills. This is a lie, a damned gringo lie. There are many left: Garrincha and Jobim, and if being alive is not a problem, I would also suggest Pele and Silvio Santos. Anyway, I detect an attitude problem here. I started this essay pretty serious, trying to educate, but somehow it turned into a "esculaco". Sorry. Anyway, on a more serious noote, there are always Xuxa, Tiazinha and even Ze do Caixao.
In 1994 Fernando Henrique Cardoso was elected and a new era began. Whatever may be his faults, at least he was original: he instituted a new economic policy, changing the name name of the currency to real (royal) and decreed that the new real would be worth 2.75 old cruzeiros reais, based upon an index called UVR, Unidade Real de Valor (Real Unit Value). Now that was original. It sounds confusing, but I wasn't in Brazil at the time, so I wouldn't know. This fiscal policy (pacote) was known, for obvious reasons, as the Real Plan, and, with minor changes it continues in force today (2004). Now we have come full circle in about a hundred years: Kings, thousand kings, crosses, new crosses, crosses (again), crusades, new crusades, crosses again III, royal crosses, royals. From kings to royals, all nobles. Note: real can de translated as either "real" or "royal". We have also lost a few zeros along the way: 000 000 000 000 000 000 000 give or take a few. What dones a person call a '1' followed by 21 zeros? I don't even know if the word exists, and that doesn't even take into account the last 2.7 times conversion in 1994 or the real devaluation that greatly exceeded the official version computed in the 21 zeros.
Another innovation was to solve the "whose face to put on each bill" controversy (if there ever was one!). For the first time, as far as I know, the Brazilian treasury issued a whole series of denominations for R$1, 5, 10, 50 and 100 reais with the same face on it. I don't know who the lady is, but the series has an ecological or nature theme and it is very nice and artistic. Another somewhat interesting detail is that Brazil has followed the lead of other countries and is using plastic money, as seen in the 10 real note above. Plastic notes are supposed to last 3 or 4 times longer than paper currency. These are actually very sofisticated bank notes, on par with almost any country in the world, incorporating the latest counter-counterfiting technology.
the common man - Here someone has put an average brazilian on the real note. He is a little on the undernourished side and may be hungry. He has the hat and look of manual labor. The "1 Real" is a play on words, meaning this is reality.
Labor day - Every May 1 (Labor day) the government traditionally announces the new "minimum salary". In May 2004 it was raised to R$ 151 - about 50 dollors for a month's work. The lady on the note says it all.
Only 8 years old... A cartoon with a message: the real may only be 8 years old (in 2002) but it's showing the ravages of time.
Lula and the dragon: "We are friends from childhood"
Lula on a sinking boat: The good ship "real" is sinking. The pineapple (in slang) symbolizes a big mess.
The robber: "Hurry, give me the money, before it loses more value"
Final note: the numbers and calculations here are only estimates. In general, the numbers presented here reflect the devaluation of the Brazilian currency (as compared to the US dollar)in the last five decades. I made have made a few mistakes, but not many. It is very hard to calaculate exactly the amount of inflation for a period, because the official indicators do not reflect reality, and because inflation is a complex phenomena that has many aspects, even if all related to the amount of money in circulation.
Page Last Updated: August 2004