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6
YEARS OF THE REAL PLAN |
6 YEARS OF THE REAL PLAN
GROWTH AND SOCIAL DEVELOPMENT
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ECONOMY I – INFLATION
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Inflation had an accentuated drop after Plano Real. Taking into account the period from July, 1994, to May, 2000, the average rate of inflation, as measured by the Wide Consumer-Price Index — IPCA, assessed by the Brazilian Institute for Geography and Statistics — IBGE, was of only 11.4% per annum, which contrasts with the average of 1,280.9% a year, during the five previous years (1988-1993). The continuity of economic stabilisation was ensured in 1999, in spite of the foreign-exchange crisis that befell the country at the beginning of that year, within the framework of the Asian and Russian crises. Measures adopted by Government aimed at the control of inflation reduced the likelihood of a scenario of deepened recession and unemployment. In addition to the devaluation of the currency, other factors put pressure on prices, such as the increase in international oil prices, the adjustment of public tariffs and a period between harvests under the pressure of draught. However, these factors did not produce a major acceleration of consumer prices, which remained within the inflation targets defined by Government. The transfer of the currency devaluation to price was small and restricted to goods transacted with foreign countries and to some administered prices. The devaluation and the raise in oil prices affected the IGP-DI (made up of products that are more sensitive to external prices) more than they did the retail inflation indexes. The IPCA, the price index used by the Central Bank to monitor the inflation targets for the year, closed 1999 at a threshold below 9%, and the accumulated index in twelve months, in May, 2000, remains below 7%.
In the first months of 2000, the rate of inflation, as measured by IPCA, presents the biggest drop since that index was created. This behaviour indicates that the impact of the foreign-exchange variation has already been overcome, and that inflation resumes its steady and persistent downward trend, as registered since Plano Real was launched. This trend confirms the suitability of the policy in place since early 1999.
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