[1] As accepted by the International Monetary Fund (IMF), hyperinflation is defined as a period of time in which the average price level of goods and services rise by more than 50% a month.

This economic event was the culmination of a number of structural aspects of the Brazilian economy including, but not exclusive to, limited foreign trade and high external public debt as well as unsuccessful preventive measures.

The Brazilian government responded to hyperinflation by using multiple periods of price freezes to artificially stop inflation.

[5] In the 1960s, Brazil had adopted a method of indexation which involved the setting of monthly or weekly domestic prices for certain investments to slightly hedge inflation.

Money is a contributing factor for the hyperinflation experienced by Brazil as well as the nation’s ability to recover through the separation and eventual reintegration of its two functions.

Inertial inflation is founded on the idea of distributive conflict which states that an economic agent will use the price mechanism to retain or improve their market share.

[17] Distributive conflict points to the maintenance of inflation as due to a lack of coordination between different economic agents.

[22] The process of deterioration in the fiscal accounts represented a major structural issue in the economy which the Brazilian government sought to resolve multiple times through different measures.

The plan functioned under the rationale that inflation was inertial and caused by structural issues such as wage indexation and systemic marked-up pricing.

[31] The plan dismantled many formal indexing mechanisms of financial assets in the Brazilian economy and was supported by monetary reform.

[34] The plan resulted in a deep economic crisis as increased wages yet frozen prices stimulated a wage-price spiral of demand-induced inflation.

The government budgetary deficit worsened as state-run enterprises had not corrected their prices to reflect future demand prior to the freeze.

[35] Real return to government debt was distorted and caused Brazil to experience capital flight for the first time in their stabilisation policies.

The plan aimed to achieve the first objective through more price and wage freezes and the introduction of a new currency (the cruzado novo).

[44] The government imposed taxes, increased the prices of goods produced by the state, cut the majority of subsidies, dismissed 50,000 federal employees and privatised public sector enterprises.

[47] The Plano Real involved anchoring the economy to a separate, distinct unit of account to reflect relative prices as the currency had lost this function.

Economic agents followed a new index, the Unidade Real de Valor (URV), which was established throughout February to June 1994 and adjusted daily.

[51] The long-term success of this plan hinged on its ability to mitigate external economic shocks without spiralling into high inflation again.