Living with Inflation: Policymaking and Popular Practices in Search of Price Stability after Brazil’s Economic Miracle Free

Abstract

This article puts inflation at the center of the making and unravelling of Brazil’s economic miracle, a period of high growth, low inflation, fast-paced industrialization, and rising consumerism between 1968 and 1973. This so-called miracle coincided with the most repressive phase of the twenty-one-year military dictatorship (1964–1985). The military regime took the credit for Brazil’s economic triumphs, weaving a narrative that democracy was bad for economic stability by blaming prior inflationary crises on profligate democratic governments and workers’ demands for higher wages. But after 1973, chronic inflation became an everyday mathematical and material hardship for Brazilian citizens—and headache for the policymakers and economists trying to forecast and freeze prices. Focusing on inflation trends and the cost-of-living crisis in Brazil from the 1960s to the 1990s, this article shows how the military’s miracle was never as solid as its supporters claimed. It argues that inflation is more than a metric for evaluating the country’s performance. Inflation became the target of seductive myths and heterodox policy experiments, as the miracle-makers tried to rewrite economic rules. Inflation also became a source of social conflict and political pressure, framing debates about social and economic justice as the country transitioned to democracy in the 1980s.

“Be a woman, bargain” became official economic policy in Brazil in 1973 (fig. 1). In newspapers and magazines, the military government ran its “Say No to Inflation” campaign encouraging women to be flirty and thrifty so that they could “buy more things,” spinning this counterintuitive logic into a strategy for how to sustain economic growth as inflation undermined consumers’ purchasing power.¹ Between 1968 and 1973, Brazil’s economy grew at an impressive average annual rate of 11 percent. Inflation also fell from 82 percent in 1963 to 16 percent by 1973.² This so-called economic miracle coincided with the most repressive years of the twenty-one-year military dictatorship (1964–85), the anos de chumbo (years of lead).³ Taking credit for the double-digit growth rates coupled with low inflation, something that once seemed unattainable, the military regime shored up support from its key constituents—industrialists, middle-class consumers, and producers—by weaving a narrative that democracy was bad for economic stability, and blaming prior inflationary spirals on profligate democratic governments and workers’ demands for higher wages.

This article explores the role of inflation in making and dismantling Brazil’s economic miracle. From 1973 to 1993, the world, according to the historian Eric Hobsbawm, “lost its bearings and slid into instability and crisis.”⁴ This crisis proved so demoralizing because it extinguished a remarkable period of postwar expansion for nations like France, Spain, Japan, Mexico, and Brazil. Soaring inflation announced the end of these miracles, and economists were forced to rethink their growth models.⁵ Yet as “stagflation” became an intractable problem for countries worldwide, Brazil charted its own course. Rather than try to tame inflation, Brazilian officials configured it into a manageable tradeoff with continued high growth rates, and this strategy allowed the military regime to prolong the illusion of its economic triumphs.

Following the 1973 oil shock, inflation spiraled upward in Brazil to become a leading indicator for how the military’s economic feats might be more mirage than miracle. Throughout the 1970s, regional inequalities widened, debt ballooned, and workers saw their purchasing power eroded by inflation, especially those employed in informal sectors. Even as the shortcomings of the military’s economic planning became apparent, Brazilian policymakers doubled down on their magical formulas, accounting tools, and economic models to repackage their failures into deliberate strategies for growth. Leading officials might have voiced loyalty to austerity prescriptions from the International Monetary Fund (IMF) and other classically trained economists, but they also spurned the conventional wisdom that fiscal and monetary restraint was the only way to achieve price stability. Brazilian policymakers instead opted for a strategy of living with, rather than eradicating, inflation. They designed price controls and indexed wages and financial assets to keep pace with inflation.⁶ They also mobilized consumers—especially women—to negotiate prices and report retailers who disregarded price controls to authorities, while still urging them to keep spending.⁷ The military’s miracle depended on debt-fueled government spending, with austerity limited to severe wage repression for workers—and even that was no match for inflation.⁸ Thus, this regime ultimately abandoned its promise of low inflation and instead tried to convince the public (and themselves) that high inflation was a driver of sustainable development that would bear fruit in the near future.

Economic policymaking during and after Brazil’s miracle allows us to reconstruct how Brazilians experienced the intense and persistent inflation that defined daily life in the 1970s and 1980s. Looking beyond macroeconomic trends and statistics, I ask how economists, policymakers, and consumers understood and tried to fix (or live with) inflation. While inflation conditioned everyday hardships for Brazilians, there is relatively little research on anti-inflation policies or how citizens navigated dramatic swings between government-imposed price freezes and the inflationary spirals that persisted in spite of them. By examining some of their strategies, petitions, and predictions, I recover the economic thinking that shaped Brazil’s spectacular postwar boom and bust, beginning with the military regime’s reforms in the 1960s and concluding with the Plano Cruzado in the 1980s. My aim is not to explain the causes of inflation or to evaluate policy best practices. Rather, I explore how “living with inflation” became official policy as the military attempted to maintain high growth rates and, more important, why government officials tackled inflation with even bolder experiments during the country’s democratization after 1985. In this drawn-out aftermath of Brazil’s miracle, we see how inflation continued to anchor seductive myths about future prosperity.

In Brazil, the unconventional and heterodox policies tested to tackle inflation across these decades are often the target of ridicule; economics has its iron laws, many will insist, and prices rise and fall in predictable ways. For economists within and beyond Brazil, the country is a cautionary tale. Despite the efforts of its technocrats to freeze, forecast, and regulate prices, chronic inflation persisted and turned hyperinflationary as the country steered its democratic transition. Such conclusions, implicitly or explicitly, inform how economists explain the “success” of the 1994 Plano Real in “finally” taming inflation by celebrating its embrace of market-based strategies. By focusing on its “success,” however, some scholars overlook how the Plano Real was itself unorthodox in pegging Brazil’s currency to a nonmonetary currency that eventually transitioned into a new currency, the real. Even the best scholarship on inflation, the anthropologist Federico Neiburg notes, will “ignore the heterodox experiments, or merely subsume them (based on anachronic projections) into the ‘predecessors of the neoliberal era.’”⁹ Recent scholarship, however, has emphasized the tendency of Brazil’s postwar governments (both authoritarian and democratic) to bend economic rules in order to highlight the intellectual continuities across these decades of policy experimentation in Brazil. This article builds on these observations by exploring the institutional legacies, economic beliefs, and political ambitions that shaped the design and implementation of anti-inflation plans from the 1960s to the 1980s.¹⁰ These experiments may have failed, but they also made it possible for Brazilians to cope with decades of crisis.

Brazilian citizens also shaped these decades of policy experimentation by imposing their evolving expectations about government’s responsibility in guaranteeing fair prices and a decent standard of living. Brazilian retailers, producers, and consumers had to constantly update their strategies to deal with wildly fluctuating prices and frequently changing rules. The question of what is a fair price and who decides has been central to political struggles in Brazil since the early twentieth century, with poor and working classes mobilizing for government protections against the rising cost of living.¹¹ Recently, historians of Latin America have approached consumption, especially to meet basic needs, as an issue of the political and social struggle to expand the meanings and practices of citizenship.¹² For Brazil in the 1970s and 1980s, workers’ strikes, women’s associations, and other pro-democracy movements seized on cost-of-living issues to protest military rule and to advocate for the rights of citizens and consumers. In less overtly political—but still forceful—ways, consumers also channeled complaints about rising prices to state agencies and police precincts, exposing the gaps between government promises for renewed prosperity and their fulfillment. As inflation accelerated throughout the century, it transformed price from a standard-of-living issue into a question of government accountability and, consequently, a cornerstone of democracy itself. In Brazil, the history of inflation is also the history of how its economic miracle collapsed into a protracted process of democratization.

Miracle or Mirage: Inflation and the Military’s Economic Plan

The economic history of twentieth-century Brazil can just as easily be written as a story of booms, development, and progress as one of busts, crises, and hardships. From 1968 to 1973, military generals and their economic advisors celebrated the economic miracle not only for high growth rates but also for their triumph over past disappointments. Following decades, if not centuries, of anticipation of the country’s industrialization, some Brazilians found evidence that Brazil had finally transformed into the país do futuro (country of the future), a phrase made famous by the Austrian-Jewish writer Stefan Zweig while he was exiled in Brazil during World War II. From 1929 to 1945, industry increased its share of Brazil’s output from 20.3 percent to 28.6 percent, while agriculture fell from 36.9 percent to 28 percent.¹³ By 1964, agriculture accounted for only 16 percent of national GDP and industry for 32 percent.¹⁴ Upon seizing power in 1964, the military committed itself to accelerating this trend. To many, Brazil’s ascent to the ranks of wealthy, industrialized, modern nations was not only evident in statistics on industrial production but also in infrastructure feats like the Trans-Amazonian Highway or in middle-class homes now equipped with televisions. As one journalist explained in 1971, “This is Brazil, which is getting stronger day by day, leaving behind the stigma of underdevelopment. . . . Today’s Brazil, which yesterday was the country of the future, is now a nation of the present.”¹⁵

Yet whereas some considered it prophetic that Brazil was the país do futuro, others could not help but find irony in how economists were always so eager to project the country’s successes far into the future. Despite Brazil’s rapid industrialization in postwar decades, some economists pointed to why it remained improbable that the country would achieve the standard of living of France or the United States. At best, one Brazilian economist said derisively in 1968, Brazil might assume “merely the position of arrogant leader to the luminous Third World.”¹⁶

Despite past defeats and persistent skepticism, the military regime nonetheless attempted, in the words of the historian Carlos Fico, to “reinvent optimism” and thereby staked its legitimacy on promises of economic prosperity and political stability.¹⁷ Taming inflation was key to both objectives. Alongside programs to promote industrialization, Brazilian officials also initiated bold reforms to bring down inflation and simultaneously enlisted conservative women’s groups to patrol price controls and denounce offending retailers. With both tactics, the military regime celebrated its triumphs over inflation while detaching the issue from workers’ struggles for higher wages.

To offer some context, by the mid-1960s, chronic inflation had become the troubling counterpart to Brazil’s fast-paced development. Since the late 1930s, rising prices, especially for food, presented social and political problems for Brazil’s governments, as workers in industrializing cities demanded higher wages. Under Getúlio Vargas, Brazil’s dictator turned populist president from 1930 to 1945 and again from 1951 to 1954, the federal government created agencies to issue price controls for essential goods and oversee the distribution of food from countryside to city. Such measures did not fix inflation, but they did recognize government protections for fair prices as an essential component of social citizenship—and revealed the extent to which inflation would remain a liability for postwar governments attempting to drive industrialization and maintain social peace. Organized labor pushed for higher wages and more government controls to deal with carestia, or the rising cost of living.¹⁸ Juscelino Kubitschek, president from 1956 to 1961, coordinated an impressive state-led drive for development, promising fifty years of growth in just five. Brazil experienced high growth rates of 9 percent to 10 percent, while middle-class consumers enjoyed greater access to automobiles and televisions.¹⁹ Critics, however, pointed to Brazil’s ballooning debt and its worsening balance of payments, blaming Kubitschek for fifty years of inflation in five. Once he left office, worsening economic conditions fueled political instability.

In postwar Brazil, inflation became the target of political conflicts and fierce intellectual debate. Brazilian economists often fell into one of two camps: monetarists, who recited economist Milton Friedman’s assertion that “inflation is always and everywhere a monetary phenomenon” and argued that fiscal and monetary discipline was essential for price stability; and structuralists and dependency theorists, who argued that inflation was a consequence of underdevelopment because of domestic bottlenecks and the worsening terms of trade.²⁰ This latter group emphasized concerning trends: while, on average, industrial output increased annually by 9 percent between 1945 and 1973, agriculture increased by only 4 percent. The growing gap between industrial and agricultural sectors posed a challenge to long-run stability. First, Brazil remained dependent on agricultural exports, especially coffee, to cushion its balance of payments and cover the importation of capital goods to support industrialization. Second, food production could not keep up with the demands of an industrializing nation. Food prices increased by 338 percent between 1939 and 1950 and by 465 percent between 1950 and 1960. This trend worsened in the 1960s, with food prices rising by an astonishing 1,706 percent between 1960 and 1967.²¹ Neither economists nor consumers could deny that the greater ease with which middle-class households acquired automobiles had not eradicated the challenges they faced to meet basic needs.

While it is an oversimplification to argue that inflation triggered the 1964 coup in Brazil, it is equally impossible to explain popular and political support for dictatorship without accounting for the rising cost of living and general sense of economic instability.²² By March 1964, annual inflation approached 100 percent, which opposition groups marshalled as proof of the government’s failures.²³ The military overthrew João Goulart, president from 1961 to 1964, and consolidated support from conservative movements, including those led by donas de casa, or housewives. The Campanha da Mulher pela Democracia (CAMDE) based in Rio de Janeiro, for example, was emphatic in its anticommunist stance and its calls for military intervention. Historians emphasize CAMDE’s growing political power and how these women forged transnational connections to similar movements in Chile and the United States.²⁴ Beyond anticommunism, CAMDE also rallied behind fighting inflation in endorsing the military’s promises to restore economic stability.²⁵

The challenges that middle-class housewives faced in buying milk or meat amounted to real hardships, which they leveraged to claim their moral authority on economic issues. Consider how CAMDE maneuvered preexisting institutions. Upon seizing power, the military regime kept the elaborate system of price controls used by prior governments. Key was the Superintendência Nacional de Abastecimento (SUNAB), a federal agency created in 1962 to set price controls on essential goods and regulate the food supply. This agency led inspections nationwide and penalized producers, warehousers, or venders who did not abide by price controls. From its inception, SUNAB depended on consumer denunciations, and this generated official and unofficial channels for donas de casa to participate in the battle against inflation. After the 1964 coup, CAMDE routinely met with representatives from SUNAB as well as from the ministries of agriculture, finance, and planning.²⁶ CAMDE also printed ads in newspapers on how to denounce violators to authorities and issued “blacklists” of retailers who refused to follow SUNAB pricing.

CAMDE (and its counterparts) turned cost-of-living campaigns into a central component of their “work to rebuild democracy,” with their definition of democracy inescapably tied to their anticommunist position and their conviction that the populist orientation of prior democratic governments had ceded too much moral and material ground to organized labor.²⁷ For decades, workers had called on the government to guarantee fair prices, articulating these claims as essential social rights. In the 1960s, CAMDE leveraged women’s roles as caretakers and consumers to cast inflation as a problem that interfered with their “daily responsibility to properly nourish their husbands and children.”²⁸ By working with SUNAB, women carved out a public role for themselves in economic planning, but one that reinforced normative gender roles. Groups like CAMDE in Rio de Janeiro or the Campanha da Mulher Contra a Inflação in Curitiba tried to depoliticize inflation by framing it as a family matter, but such arguments also served the military’s pro-business and antilabor orientation. Conservative women defended their actions in the name of “democracy,” yet their definition of democracy amounted to a dictatorship trying to neutralize social conflicts around economic problems by turning inflation into an “easy understanding between government, business, and consumers.”²⁹

To tackle inflation and jump-start growth, the military regime launched a new economic program that generally benefited industrialists and consumers, while workers bore the burden of austerity policies. Minister of Planning Roberto Campos promised fiscal and monetary reforms with the aim of restoring price stability. From 1964 to 1967, his Programa de Ação Econômica do Governo (PAEG) took a three-pronged approach: first, eliminate government deficits and restore confidence in government bonds with the Readjustable Obligations of the National Treasury (ORTN), an inflation-indexed bond that made it possible to finance long-term borrowing; second, restrict credit to businesses to tame demand-fueled inflation; and third, use a formula for automatic salary adjustments to align wages with productivity.³⁰ As much as Campos and his successors professed their commitments to fiscal and monetary discipline, the military regime expanded government spending, largely remaining faithful to the state-led developmentalist programs guiding industrialization since the 1930s.³¹ In the late 1960s, IMF mission leaders in Brazil often criticized that the lack of follow-through on pledges to curb government spending would not bring long-term relief for inflation.³²

Where the military broke with tradition was in its repression of real wages with the PAEG formula to adjust workers’ salaries for inflation.³³ The regime systematically underestimated (or even falsified) inflation estimates, which meant that wages progressively lost purchasing power. In Rio de Janeiro, the real minimum wage fell by 38 percent between 1964 and 1970.³⁴ Falling real wages after 1964 contrasted sharply with the prolabor policies of populist governments from Vargas and Kubitschek to Goulart, with economists noting that real wages in Rio de Janeiro had increased by 26 percent between 1952 and 1964. The Brazilian economist Mário Henrique Simonsen, finance minister from 1974 to 1979 under General Ernesto Geisel, later celebrated the PAEG formula because “it had the advantage of replacing an endless game of striking and protest with a simple arithmetic calculation.”³⁵ In practice, it was not the PAEG formula but the regime’s repressive tactics that eliminated workers’ strikes. It was no coincidence that Brazil’s miracle coincided with the dictatorship’s most violent years when students, leftists, and trade unionists endured censorship, arbitrary detentions, and disappearances.

The military celebrated the PAEG for laying the groundwork for its economic miracle. The economy recovered by 1968, with industry growing at average annual rates of 20 percent for the next six years. For Antônio Delfim Netto, finance minister from 1967 to 1974 during the repressive presidency of General Emílio Médici, Brazil’s miracle was self-sustaining because of how new sources of credit bolstered consumer demand, which in turn stimulated industrial production and employment.³⁶ Exports also more than tripled from US$1.9 billion in 1968 to US$6.2 billion in 1973, which turned the balance of payments from a deficit to a surplus. Triumphantly, the regime took credit for bringing down inflation, which fell to 16 percent by 1973. These successes were key to the regime’s survival. Despite repression, the military remained in power for twenty-one years partly because it could count on support from a growing middle class that accepted this authoritarian system in exchange for an improved standard of living.³⁷

Yet to what extent could the military claim this credit? Critics such as the structuralist economist Maria da Conceição Tavares questioned how quick the regime was to celebrate its own successes, especially on inflation. Rather than restore price stability, the PAEG turned inflation into an instrument for financing industrialization, ultimately benefiting large corporations with access to foreign capital while generating new bottlenecks and increasing the concentration of wealth. Already in 1967 Tavares recognized how turning inflation into a “great defense mechanism against stagnation” would generate artificial profits for industry and banking while inevitably aggravating social tensions.³⁸ Since her prescient observations, economic historians have further discredited the military’s miracle. Was Brazil’s performance in these years more recovery than miracle, as the country rebounded from the global recession of the early 1960s?³⁹ To what extent did the miracle depend on the process initiated with Kubitschek’s push for “fifty years in five,” or even Vargas’s corporatist overhaul of industrial relations?⁴⁰ Or was it the expansionary credit policies and foreign direct investment, coupled with ruthless wage repression, that drove rising industrial production?⁴¹ While scholars continue to debate these questions, this last explanation is as essential for explaining Brazil’s meteoric rise in the late 1960s as its spectacular downward spiral in the 1970s.

“Growthflation” and the Miracle’s Undoing

“De repente, tudo como nos velhos tempos”—“Suddenly, everything was as it was in the old days.”⁴² By 1973, the cracks in Brazil’s growth model were apparent, even as the military exaggerated its successes and rode the wave of euphoria over Brazil’s third World Cup victory in 1970. From 1973 to 1980, the economy continued growing at average annual rates of 8 percent.⁴³ While the rest of the world slipped into recession, Brazil’s generals could still reasonably defend their record. Critics of the military’s program, however, questioned if Brazil’s miracle was sustainable, pointing to widening income inequality and regional disparities. Another indicator, moreover, ticked upward: inflation. Following the 1973 oil crisis, inflation in Brazil jumped to 35 percent in 1974 and reached 80 percent by 1979 (fig. 2). Rising inflation was, in part, a consequence of higher oil prices. While government technocrats could conveniently blame the exogenous supply-side shock for spiraling inflation, it became increasingly hard to deny that Brazil’s economic miracle had sown the seeds for its own undoing.

The economist André Lara Resende notes that as early as 1967, Finance Minister Delfim Netto openly “abandoned the objective of totally conquering inflation, announcing publicly that a yearly inflation of 15 percent would be tolerable.”⁴⁴ Médici’s miracle, Resende summarizes, depended on wage repression and foreign capital infusions in the form of direct investments and loans, and even the severest wage repression was not enough to counteract the inflationary pressures of expansionary policies. From 1968 to 1974, Brazil’s external debt ballooned from US$4 billion to US$20 billion.⁴⁵ Higher levels of foreign debt made Brazil vulnerable to future shifts in international financial markets.⁴⁶ Even the PAEG’s celebrated indexation system became a sign of moral if not monetary defeat by ostensibly amounting to an admission by the government of its failure to combat inflation. Bankers and industrialists used the ORTN as the basis for the monetary correction of fixed assets and so it acquired the status of a parallel currency, one that functioned as a better store of value and as a medium of exchange in financial transactions.⁴⁷ Even PAEG’s architect Campos admitted in 1975, while serving as ambassador to the United Kingdom, that indexation was no “miracle formula” but a “second-best solution, to be resorted to when there is no prospect of restoration of price stability.” PAEG reforms, in other words, tried “to neutralize the distortion caused by inflation” but not to “fight inflation.”⁴⁸ By the mid-1970s, Brazil was experiencing what economists termed “inertial inflation,” or the rise in prices because of the “formal and informal mechanism for indexation, which turns yesterday’s inflation into the primary cause of today’s inflation.”⁴⁹

Brazil’s approach to living with inflation became a topic of international debate, too, with some economists praising the regime for its unorthodox policies even as evidence of exhaustion mounted.⁵⁰ Even inflation hawks at the IMF noted that Brazil had become “accustomed to chronic and rather heavy inflation.”⁵¹ It followed that it did not necessarily make sense for Brazil to use the same strategies as other countries. In the United States, rising inflation led economists to abandon midcentury growth models as irrelevant in the face of “stagflation,” but Brazilian officials continued to spin their heterodox indexation schemes into a recipe for “growthflation.”⁵²

As recession loomed worldwide, Brazilian technocrats applied magical thinking to their macroeconomic calculations; inflation might be endemic to Brazil, but was that necessarily bad? By some metrics, Brazil’s miracle remained relatively unshaken by the 1973 oil shock.⁵³ Between 1974 and 1980, annual growth in industry averaged 7 percent, lower than during the miracle years but hardly showing signs of stagnation. With a growing middle class, domestic consumers continued buying Brazilian-made automobiles and televisions.⁵⁴ At the same time, chronic inflation posed an inescapable paradox: high inflation fueled consumerism—why save if tomorrow’s money will be worthless?—but the spending sprees were themselves inflationary. The military dictatorship used inflation to sustain its economic miracle, and this strategy became its greatest liability.

To live with chronic inflation was hardly simple or straightforward. From the 1970s, Brazilian consumers, workers, industrialists, grocers, and retailers had to constantly update how they bought and sold goods to maximize their profits and purchasing power. For Brazil’s incipient but growing middle classes, inflation undermined their ability to satisfy their needs and wants, turning into a daily reminder that the progress that seemed assured just a few years earlier was evaporating.⁵⁵ The historian Louise Walker describes how in Mexico, following its own period of “miraculous” growth, there was a palpable sense that the nation was “waking from the dream.”⁵⁶ Rather than a sudden jolt, the unraveling of Brazil’s miracle was a gradual process, hardly perceptible at first. The Austrian-Brazilian economist Paul Singer used the Portuguese expression “se esgotou” (has ran out) to describe the slow exhaustion of Brazil’s miracle.⁵⁷

Throughout the 1970s, Brazil stood at the tipping point between living with and unraveling from inflation. Buying in bulk became a nearly universal practice among middle-class consumers, turning into a “sporting event” in cities like São Paulo and Rio de Janeiro as daily shopping invited cutthroat competition.⁵⁸ When SUNAB temporarily lifted price tables for goods like meat, butchers quickly restocked and donas de casa flooded into shops. Scholars of consumption often focus on the acquisitive thrill driving middle-class demand for new fashions to understand the emergence of new ideological and political projects to define what constitutes a decent standard of living.⁵⁹ In 1970s Brazil, that euphoria was also palpable in how people acquired cooking oil or flour. Journalists described the frenzied acquisitions with amusement and derision: dozens of tubes of toothpaste, boxes upon boxes of pudding mix, or cases of olive oil in single shopping sprees. Whether or not the acquired goods were practical or necessary seemed to be beside the point; shoppers, at the end of their spree, stood around for “the careful sharing of trophies and expenses.” As much for university-trained economists as for bystanders, buying in bulk became both cause and consequence of inflation. What economists discussed in terms of the psychology of future expectations, one Veja columnist mockingly called a “collective psychosis of scarcity.”⁶⁰

Public campaigns proliferated with instructions to housewives on how to bargain for better prices and economize in their shopping. In 1973, as discussed above, the regime’s Conselho Nacional de Propaganda launched its famous “Say No to Inflation” campaign, as if it were a choice (fig. 1). The campaign featured white, middle- and upper-class women, adorned in jewelry and the latest fashions, exhorting fellow donas de casa to use their good looks and charm to bargain down prices and stretch their household budgets. The ads reinforced traditional gender norms as much by asserting that a woman’s primary responsibility was cooking and caring for the family as by fixating on flirtation as her primary economic strategy. They also glossed over the struggles of working-class women, especially Black and mixed-race women.⁶¹ The “Say No to Inflation” ads quickly became a target of mockery. Journalists stressed the comical mismatch between the compounding economic problems and how the military dictatorship transferred the burden onto small businesses and housewives. As the editor of a Pernambuco newspaper protested, the povo, or people, had only one way to comply with this mandate: “deixando de comer e de vestir”—to stop eating and buying clothes.⁶²

The military’s strategy in these years was precisely to make consumers and retailers responsible for inflation. Even though the regime limited the rights of citizens to free association, consumer associations grew in number in the 1970s to channel consumer frustrations into regulatory action, or, perhaps, to distract from the regime’s ineffectiveness at lowering inflation. The government’s anti-inflation campaigns ran alongside those by consumer associations outlining strategies for women on where to shop and how to confirm whether retailers followed price tables. In Rio Grande do Sul, for example, the Associação de Proteção ao Consumidor was established on May 13, 1975, with the date no coincidence as the founder assured that “the Association was created on the anniversary of the abolition of slavery in order to liberate the Brazilian consumer from the enslavement they suffer in the hands of unscrupulous industrialists and merchants.”⁶³ Organizations like the Associação Nacional de Defesa do Consumidor were even partially funded by the Ministry of Finance as “a way for the government to defend the popular economy.”⁶⁴ The category “popular economy” refers to the people’s “pocketbook” or to the financial well-being of popular classes. It dates to Vargas-era criminal laws of the 1930s that outlined penalties for economic crimes including usury and price gouging. Laws to defend the popular economy evolved in subsequent decades, cementing in the popular imagination the idea that fair prices for essential goods was an economic right.⁶⁵ Yet the enforcement mechanisms in place to deter speculation had always been threadbare and would remain so.

Behind the public campaigns and consumer associations stood a complex and expanding set of government agencies responsible for controlling the price and distribution of essential goods. The Conselho Interministerial de Preços (CIP), established in 1968, and SUNAB were two of the main organs responsible for price controls for producers and retailers.⁶⁶ SUNAB, in particular, was responsible for defending consumers; when someone suspected a crime had been committed, they called SUNAB offices or the local police. SUNAB even launched its own public campaigns calling on consumers to be vigilant against saboteurs: “Defende-se: Ajude a Sunab a Defender Você” (“Defend Yourself: Help SUNAB Help You”).⁶⁷ As public service announcements exhorted consumers to “exercise your rights,” it became increasingly apparent how ineffective this system of price controls was. Consumers voiced their frustrations with the “abuses of so many merchants who do not respect the SUNAB tables.” Even when SUNAB was able to investigate retailers, its presence was hardly a deterrent, and consumers complained that “at the end of each week, we notice random increases in the price of goods, especially for food.”⁶⁸

Consumer complaints turned retailers into internal saboteurs of Brazil’s miracle as food prices were subjected to administrative review and criminal investigation. After the 1973 oil crisis, it was not just the price of gasoline or imported goods that threatened to unravel the progress of previous years. Consumers filed complaints against the butchers who ignored SUNAB prices for ground beef and the restaurants that increasingly charged a couvert (service fee) for bread and butter, a practice that while not technically illegal departed from the convention that these items should be free of charge.⁶⁹ SUNAB tracked the number of denunciations filtering into regional offices, with officials logging the monthly fines.⁷⁰ As inflation worsened, the denunciations increased, but so did people’s frustration with this system. Felicia de Oliveira, for example, called her precinct multiple times to complain about exorbitant prices, but with little consequence. “The police bureaucracy is very slow to punish a misdemeanor,” she lamented.⁷¹ The problem was systemic. SUNAB investigations against repeat offenders were often archived without resolution. In 1979, for example, one official at SUNAB’s Bahia office admitted to a series of “irregularities” in how this office processed complaints. In the previous two years, hundreds of criminal investigations into price violations had either been abandoned or dismissed without cause while the “retailers [continued to] act with impunity.” The official even noted the “pages ripped from the case files” pertaining to high-profile investigations, seemingly to prevent any resolution. Retailers, moreover, complained about the “fines applied, often in arbitrary ways and contrary to the legislation in place.” Some consumers, frustrated by the bureaucratic dead ends, called to disband SUNAB given its “total inefficiency and lack of structure.”⁷²

Brazilians of all social classes had to keep track of inflation indices, SUNAB tables, wage adjustment schedules, and credit timetables, all of which required a sophisticated literacy in math. And yet the consumer complaints, bargain shopping, and installment purchases were no match for rising inflation. Conservative women’s groups like CAMDE receded into the background in the 1970s, perhaps because it became too difficult to reconcile their anti-inflation campaigns with their continued loyalty to the military dictatorship. In their place, progressive social movements emerged to channel people’s daily hardships into formal petitions for the government to do more to control prices.

In 1973, for example, women belonging to “clubes de mães,” or community mothers’ associations, founded the Movimento do Custo de Vida (Cost of Living Movement).⁷³ Established in poorer and underserved neighborhoods on the periphery of São Paulo, these women spearheaded their movement with a survey comparing the prices for fifteen essential foods in October 1972 and October 1973. At the start of 1973, Finance Minister Delfim Netto had promised that inflation would not surpass 12 percent, and yet this forecast did not capture the everyday struggles of poor and working-class Brazilians. The “mães da Periferia de São Paulo,” as the women signed their petition to the president and other public officials, protested the rising cost of living and how it disproportionately impacted working-class communities. From 1972 to 1973, they reported that food prices increased by 69 percent in São Paulo’s wealthy central neighborhoods and by 120 percent in the periphery.⁷⁴ Income inequality worsened during Brazil’s miracle, and inflation exacerbated the consequences of this trend for working-class Brazilians.

Brazil’s military regime responded to mounting pressures from civil society by slowly loosening some of its repressive measures and reintroducing limited channels for political competition. The repressive anos de chumbo under Médici gave way to the distensão, or loosening, under Geisel. In 1974, the regime initiated a process of slow, gradual, and top-down political liberalization by allowing open elections for Congress in which a single opposition party, the Movimento Democrático Brasileiro (MDB), ran against the military’s official party. The MDB won far more seats than expected, and it became apparent that Geisel had overestimated the level of popular support for the regime’s policies.⁷⁵

Amid this controlled political opening, inflation offered an obvious and everyday example of how the military regime failed to deliver long-term stability and a decent standard of living. The economy became an arena of social conflict and renewed citizen demands for economic rights. By the late 1970s, inflation was the target of lockouts, strikes, and protests organized by workers, producers, and ordinary citizens taking direct action by folding carestia into pro-democracy protests.

The Movimento do Custo de Vida remained one of the most important of these groups for how it turned protests against inflation into protests for justice and equality. These women repeatedly petitioned the president and other officials with concrete demands: first, price freezes on goods, followed by salary increases for workers, additional family benefits, and investments in food-growing cooperatives.⁷⁶ They justified their demands by citing laws dating to the 1930s and by detailing their everyday struggles. Doing so, they expanded the meaning of economic justice beyond prices and wages to advocate for a range of goods and services. In August 1978, for example, this movement drafted a petition, signed by more than one million people, clarifying that carestia was about more than food prices; it encompassed everything spent on housing, schooling, transportation, and health care. The movement highlighted disparities in access to essential goods, infrastructure, and services, noting the lack of running water and sewage in their peripheral neighborhoods and the limited number of schools. Beyond all that, they also insisted that “all of us, as human beings, have the right to recreation, rest, and everything that enriches our lives. And all that costs money.”⁷⁷

As social movements intensified their opposition to the military’s handling of the economy, Brazilian officials deflected attention from their failures by doubling down on their convictions that democracy remained the real threat to Brazil’s progress. Their arguments were reinforced by the rise of military dictatorships in neighboring Latin American countries. While Brazil’s military regime never supported the neoliberal policies embraced in Chile after 1973 or Argentina after 1976, each of these dictatorships spun narratives that blamed chronic inflation on the wage-price spiral driven by the pro-labor policies of prior democratic governments. And by the 1970s, political explanations for inflation had become routine in other parts of the world as well.⁷⁸ In the United States, for example, social scientists looked to the “vote-maximizing political business cycle” to explain inflation as a rational policy choice for politicians confronted with wage demands from unionized workers.⁷⁹ Brazilian officials internalized this logic as they defended their iron grip on policymaking. Campos and Delfim Neto argued that hasty democratization would only make economic matters worse: “Too frequent electoral consultations seem to be incompatible with a coherent and effective anti-inflationary policy, and may indeed lead to ‘stop-go’ patterns of behavior, with policies being relaxed before they become effective.” Economic stability, for Campos, required the “substantial delegation of power to the Executive Branch of government, to enable it to orchestrate monetary, fiscal and income policies.”⁸⁰

Brazil’s finance ministers, however, had long abandoned their commitments to fiscal and monetary discipline, and workers were not the group driving inflationary policies. PAEG reforms certainly codified winners and losers, but the protections offered with indexation for financial assets in fact generated a climate in which holders of financial capital profited wildly from inflation. In 1970, banking accounted for 5.4 percent of Brazil’s GDP; this value had jumped to 7.9 percent by 1980 and would reach 11.9 percent by 1985.⁸¹ Campos and Delfim Netto had generated an attractive investment climate as much by suppressing wages as by protecting foreign and domestic capital from losses. “Growthflation” benefited the banking sector and large corporations, generating all sorts of incentives for the military dictatorship to accept high inflation as a workable development strategy.

The military regime’s penchant for debt-led growth might have delayed the effects of the 1973 global recession, but 1978 marked a turning point as interest payments on debt spiked and inflation showed no signs of easing.⁸² Brazilians continued their shopping sprees, now motivated more by pessimism about the economic forecast. Out of “desperation,” the historian Matthew Nestler argues, Finance Minister Mário Henrique Simonsen launched another anti-inflation advertising campaign, one mocked by the public because it again turned prices into a problem for small businesses and housewives to figure out.⁸³ The burden of inflation always fell hardest on the poor and working classes, but now Brazil’s finance ministers struggled to convince middle-class consumers, industrialists, and even themselves that inflation was under control.

The military celebrated indexation and price controls as rational technocratic solutions, but Brazilians were losing confidence in economists and their economês, or economics jargon, if they ever had such faith.⁸⁴ Officials demurred or denied wrongdoing when confronted about their failures to predict or contain inflation, and this generated more public distrust. Even Campos eventually admitted the “failure” of economists to predict the “seriousness of inflation” and lamented how “humbly I have come to realize, that there is something, after all, to the infamous objurgation thrown at Brazilian economic technocrats by disgruntled politicians, that ‘economics is the art of achieving misery with the aid of arithmetic.’”⁸⁵

The “arithmetic” used by Brazilian officials, however, was not only faulty—it was also fraudulent. In August 1978, more than fifty thousand people, including workers, students, members of the Movimento do Custo de Vida, and other pro-democracy groups, gathered in front of the São Paulo Cathedral. They protested not only the rising cost of living but the government itself because it had forged the official inflation rate used to calculate salary adjustments and other monetary corrections. The government, using the index of the Instituto Brasileiro de Economia (IBRE) at the Fundação Getúlio Vargas, estimated inflation at 12.6 percent in 1973, but the Departamento Intersindical de Estatística e Estudos Sócio-Econômicos (affiliated with labor unions in São Paulo) calculated it at 22.5 percent. Why protest these numbers five years later? The protest erupted following a World Bank report that questioned IBRE numbers, suggesting that the military regime was either willfully lying about inflation or too incompetent to measure it accurately. Debates over numbers, according to Neiburg, mobilized political action.⁸⁶ Inflation accounting not only mattered for how Brazilians perceived their well-being, but also for their waning trust in a government that staked its legitimacy on the tradeoff between civil liberties and economic prosperity.

This protest marked a turning point because it exposed the growing sense of economic uncertainty and the military’s inability to maintain social peace. Just a few years before, government technocrats had boasted of their clever steering of Brazil’s miraculous takeoff, but now their statistics were the target of public ire and ridicule. Years later, in an interview with Delfim Netto broadcast on the television program Globo Debate, a reporter cut to interviews with workers, consumers, and politicians polled about the former minister’s record. As one interviewee contended: “In ’73 he ordered the manipulation of statistical data. That was proven. . . . And ’73 was the year when Minister Delfim Netto could not count beyond twelve. He spent the whole year saying that inflation was 12 percent, 12 percent, 12 percent.”⁸⁷ In fact, inflation not only exceeded 12 percent, it was skyrocketing to unimaginable heights.

With the second oil shock in 1979, the strategies of prior decades became unsustainable. The so-called Volcker shock led interest rates to reach 20 percent in the United States by 1981, increasing the cost of borrowing globally. Across Latin America, debt obligations became unmanageable. The region’s so-called lost decade brought debt crisis, high unemployment, anemic growth, and volatile inflation in the 1980s. For Brazil, real GDP tripled from 1965 to 1980, with per capita income doubling and industrial production increasing fourfold. And then Brazil spiraled into its deepest recession in modern history: the GDP showed an absolute decline in 1981 for the first time since 1942. Brazil’s growth rate fell from an annual average of 9 percent in the 1970s to 3 percent in the 1980s. The country’s capital goods industry also went into serious decline, with production in 1983 barely at 60 percent of 1980 levels. Inflation reached 111 percent in 1980, a trend that worsened as triple-digit inflation became the new normal. In Brazil, the cumulative consequences of the debt crisis were starkest for the standard of living. GDP per capita fell by 15 percent between 1980 and 1983 and did not recover 1980 values until 1987.⁸⁸ Between 1981 and 1989, the Gini index, a measure of inequality, rose from 0.57 to 0.63, just as the country prepared for democratization. As unemployment spiked and the cost of living spiraled, other social problems compounded as urban violence proliferated and municipal governments struggled to meet the basic infrastructure and sanitation needs of local communities. The miracle came to a definitive end.

After the Miracle: Democracy and Inflation

In 1984, Brazilians mobilized for their country’s transition to democracy. Direitas Já (Direct Elections Now) protests erupted, calling for a direct presidential election to formally end the decades-long dictatorship. The slow and controlled process of liberalizing the military’s grasp on power, first distensão, or loosening, and then abertura, or opening, gave way to a mass movement. Direitas Já protests failed to bring immediate direct presidential elections but succeeded in asserting that Brazil’s democratic transition would be open and participatory. The 1988 Constitution epitomized this commitment. A National Constituent Assembly, comprising members of civil society groups and political parties, convened in early 1987 to draft a constitution. Working groups and individuals across the country mailed proposals calling for far-reaching welfare programs such as universal health care alongside those demanding immediate relief from economic hardships.⁸⁹ Concerns over inflation permeated these discussions. Citizens called on their government to guarantee fair prices for milk and meat. As aspirations for Brazil’s future mounted, a dispiriting question lingered: “O que poderá acontecer com a economia?” (What will happen to the economy?)⁹⁰

In 1984, annual inflation stood at 228 percent. By 1988, when Brazil ratified its constitution, it reached 1,118 percent (fig. 3). Brazil’s miracle had burst; its gains eroded as accelerating inflation threatened both macroeconomic stability and citizens’ well-being. In public debates and in people’s everyday complaints, inflation was the economic event of the 1980s—a numerical measure of another boom-bust cycle gone awry.

In the 1980s, economic questions—of fairness, relief, and efficiency—became essential to debates over “what is a democracy?” This question was debated within Brazil and across Latin America, from Mexico to Argentina, as the region struggled with debt, inflation, and rising poverty. By 1982, Brazil was the developing economy with the largest debt, estimated at US$86 billion. Initially, officials were optimistic about their ability to avoid Mexico’s fate—a dramatic currency devaluation—but Brazil eventually was forced to restructure its foreign debt and enter painful negotiations with the IMF. As the debt crisis unfolded alongside the country’s democratization, the public debated: Would Brazil’s first civilian governments following military rule be more accountable to foreign creditors than to its own citizens?⁹¹ IMF-imposed austerity stood at odds with the government’s promises to end hunger and improve living conditions. Activists who in the 1970s challenged military rule by mobilizing for improved health care, sanitation, education, and other public services for poor and marginalized communities now had direct influence with their election to public office. But inflation thwarted democratic aspirations as municipal governments went bankrupt and abandoned public services.⁹²

The so-called winners of inflation tended to be the large corporations and propertied classes, and yet the assumption that inflation was a political choice driven by working-class demands nonetheless persisted in the 1980s. Banks enjoyed protections through the indexation system and the government itself profited from the monetary financing of budget deficits. The burden of inflation fell hardest on the poorest segments of society, namely the 50 percent of the population without access to formal banking (and thus dependent on paper money to make payments) and workers ineligible for formal wage adjustments.⁹³ Yet some economists and political scientists still blamed inflation on the electoral calculations that led politicians to accelerate the monetary financing of expansionary budgets.⁹⁴ Conveniently forgetting the military’s profligacy, inflation once again quickly turned into a problem endemic to democracies.⁹⁵

Those skeptical that a fledgling democracy could implement prudent reforms found a useful case study in Brazil. In 1986, President José Sarney announced the Plano Cruzado. Sarney’s rise to the presidency was unexpected. In 1985, Tancredo Neves had picked Sarney as the vice presidential candidate for the indirect elections. Neves won the election but died before taking office, and so Sarney became the first civilian president after two decades of military rule. Sarney had two tasks: to oversee Brazil’s democratization by convening the National Constituent Assembly and to tackle inflation. When he took office in March 1985, prices were rising by 10 percent each month, with annualized inflation reaching 243 percent by the end of the year. In February 1986, prominent economists working with Finance Minister Dílson Funaro—including Pérsio Arida and André Lara Resende, who later worked on the Plano Real—drafted Decree Law No. 2.283 to outline the Plano Cruzado, the first of many attempts to fix inflation during Sarney’s and his successor Fernando Collor de Mello’s administrations. Sarney’s opponents accused him of using the Plano Cruzado as a populist gambit to win popular support for his party.⁹⁶ But Sarney’s supporters defended his plan as a more egalitarian and democratic approach to inflation for how it increased real wages and froze prices, a formula that shifted more income and purchasing power to low-income citizens.

The Plano Cruzado (and, with some tweaks, the subsequent plans too) aimed to stop inflation in its tracks by freezing prices. To recall, the Movimento do Custo de Vida and other social movements had petitioned for price freezes in the 1970s and so this measure was met, initially, with popular support. The Plano also replaced Brazil’s currency the cruzeiro with the cruzado, worth 1,000 cruzeiros. As simple as the plan seemed—to ban retailers and wholesalers from price increases and issue a new currency to function as a more reasonable unit of exchange—nothing about it was straightforward.

For future commentators and scholars alike, the plans tested in these years—the Plano Cruzado (1986), Plano Cruzado II (1986), Plano Bresser (1987), Plano Verão (1989), and Plano Collor (1990)—were doomed to fail, with the logic and instruments underpinning these plans ridiculed for years to come. The Plano Cruzado unleashed explosive demand for consumer goods because Brazilians took advantage of price freezes, for food and televisions alike, in anticipation of future increases. The freezes, in turn, generated scarcity and contraband markets. Yet what seems obvious in hindsight is not useful for understanding how these plans functioned and altered both public and private understandings of the price mechanism and what constitutes fair market value.

The spectacular failure of inflation planning should not, moreover, overshadow the euphoria in 1986, when it appeared at first that the Plano Cruzado might work. Monthly inflation rates fell from 17.79 percent in January to 0.32 percent by May.⁹⁷ Many leaned into the hype over this plan because, in theory, it addressed the hardships of the poor and working classes. The price freezes were a strategy to stop inertial inflation by de-indexing the economy, a heterodox approach indebted to conversations with economists in other countries. In fact, Argentina’s Austral Plan and Brazil’s Plano Cruzado were designed in tandem and shared many features. Both plans were shaped by democratizing impulses, as Raúl Alfonsín, Argentina’s first civilian president following seven years of military rule, also confronted the question “What is democracy?” amid debt crisis and violent inflation. The answer, historian Jennifer Adair shows, was as much about access to food as to the ballot box, with Alfonsín promising to eliminate hunger and shortages.⁹⁸

The Plano Cruzado announced a new minimum salary and automatic adjustments for workers’ wages as soon as annual inflation reached 20 percent.⁹⁹ Maria da Conceição Tavares, hostile to IMF recommendations and later a supporter of the Workers’ Party (Partido dos Trabalhadores [PT]), gave an emotional testimony shortly after Sarney announced the Plano Cruzado to defend its economic logic and advocacy for workers’ interests. The Plano Cruzado, for Federico Neiburg, was exceptional for the heterodox ideas it put into practice (rejecting calls for fiscal and monetary austerity) and for how it united structuralist and developmentalist economists such as Tavares and a rising cohort of economists like Resende and Arida trained in new mathematical methods at the Pontifical Catholic University of Rio de Janeiro (PUC-Rio) and universities in the United States.¹⁰⁰ Tavares, during a nationally televised interview in March 1986, claimed that “there are very few times in my professional life that I have been proud of my profession,” and added that economics had been sabotaged by the “technocratic abuses committed in those [the military] years.” In her view, the Plano Cruzado departed from how the military executed its plans through violent measures to repress workers and with little regard for whether their wages could support a decent standard of living.

Brazilian officials promised transparency and initially praised the Plano Cruzado for how it guaranteed economic fairness with the tablita, the conversion table used to calculate the current value of debts and other contracts, as well as the government-issued price tables that listed the legal prices that retailers could charge for goods. While price tables in particular had been a staple of economic life for decades, somehow the Plano Cruzado offered something new—and something consistent with values of popular participation in government and economic fairness. These were the same values that social movements across Brazil foregrounded in debates over the new constitution being drafted as the Plano Cruzado was implemented. This optimism now seems naive at best. In fact, Tavares was later mocked for her praise of the Plano Cruzado, as journalists zeroed in, with their chauvinist overtones, on her emotional and tearful endorsement. Tavares, in turn, continued defending her initial optimism: “I cried because it was the first plan that I saw defending the interests of the poor,” she explained years later when criticizing how the Plano Real might have fixed inflation but made workers worse off in the process. In 1996, she lamented: “Today, it is not easy for me to cry for an economic plan.”¹⁰¹

Despite these erratic times, Brazil’s economy initially showed signs of recovery following the debt crisis, with GDP growth at 7.5 percent and industrial growth at 11.3 percent in 1986. This growth was driven by insatiable consumer demand for durable goods, as the reasoning that saving money was the equivalent to throwing it away intensified. One might expect that the debt crisis had extinguished any lingering memories of past prosperity in Brazil, but journalists conjured up the military’s miracle in their forecasts. “Brazil seems to have returned to the golden years of the economic miracle,” one journalist splashed on the front page of a May issue of O Jornal do Commercio to summarize the optimism of industrialists and consumers in the early days of the Plano Cruzado.¹⁰² Others warned that inflation-fueled buying was a recipe for a future crisis. “We are in paradise,” Wolfgang Sauer, president of Brazilian Volkswagen, observed, “making money like never before.”¹⁰³ This euphoria, he warned, was an “illusion” as long as inflation remained out of control and the debt crisis was unresolved, and this illusion was in fact reminiscent of past miracles.

As is well documented, the Plano Cruzado (and its successors) failed to tame inflation—which reached 2,851 percent in 1993—and generated new problems. Perhaps the image that best defined the spectacular unraveling of Brazil’s potential as the país do futuro was that of supermarkets with empty shelves. In newspapers and ads circulating in the public sphere, the burden of navigating inflation continued to fall on women, responsible for maximizing household budgets in this context of contraband markets, empty shelves, and ersatz substitutions for essential goods.¹⁰⁴

As scarcity generated creativity, additional paradoxes emerged in Brazil. For example, meat consumption doubled in middle-class households between February and July 1986, all while newspapers reported meat shortages across the country.¹⁰⁵ Meat disappeared from the butcher shops and supermarkets legally required to uphold SUNAB pricing and found its way into contraband markets. Local newspapers tracked the meat supply with meticulous and sensational detail, with investigative reporting on cattle ranching and how intermediaries distorted supply chains by hoarding meat in anticipation of “thaws” in price freezes, alongside anecdotal reporting on the strategies that donas de casa used to buy meat. Government reports, in turn, churned over statistics on the number of fines or arrests, with owners of refrigerated warehouses and wholesale distributors arrested by federal police for “charging an ‘ágio’ on the sale of meat.”¹⁰⁶ Increasingly, Brazilians applied the term ágio, or a premium that signifies some usurious transaction, to describe buying goods at the butcher or the open-air food markets. Goods like meat often become targets of speculation and price gouging in wartime and during other national emergencies, but Brazil was not at war in the 1980s.¹⁰⁷ With exceptional economic strategies deployed in peacetime, controversies about price and supply turned into fundamental debates over the role of government in guaranteeing citizens’ basic needs.

To prevent speculative behavior, Sarney famously called on citizens to denounce retailers selling above the official price freezes or merchants engaged in illegal activities. The fiscais de Sarney (Sarney’s inspectors)—largely donas de casa doing their routine shopping—issued complaints to police, which led to investigations that sometimes resulted in business closures.¹⁰⁸ Sarney’s government seized on the participatory spirit of Brazil’s transition to democracy to amass public support for his plans, turning ordinary citizens into agents of public regulatory powers. In fact, the fiscais de Sarney were the reinvention of older tactics in Brazil, dating to the 1930s, in which governments issued special decree laws to punish speculators. Such efforts allowed the government to boldly broadcast its efforts to protect citizen well-being, but compliance was too uneven to be effective. Given how fragile the public’s trust in government was in the 1980s, consumer denunciations remained more a safety valve than an effective enforcement mechanism.

Opportunities to strategize and hoard were not accessible to all Brazilians, and the Plano Cruzado’s impact was highly different across socioeconomic classes. The wage adjustments built into the plan benefited professionals and workers in the formal sector who belonged to powerful trade unions. Those with the means to do so deployed strategies to maximize their purchasing power at the supermarket and invested their wealth in inflation-hedging ways. According to the anthropologist Maureen O’Dougherty, such investments often took the form of consumer durables like refrigerators or automobiles, or what she calls “miniaturization in real-estate investment.”¹⁰⁹ For the working poor, however, salary adjustments were irregular and improvised; the poor lacked the means to purchase nonperishables in bulk or store their wealth in household durables. Economic justice was not only a matter of buying food at fair prices but about access to banking services and other tools that would make it possible to anticipate and meet future needs.

Brazil’s first civilian government after decades of military rule attempted a radical experiment to defeat inflation with economic tricks that defied the conventional wisdom that fiscal and monetary contractions were the only solution. Sarney’s ministers promised the public that price freezes would bring economic recovery—and maybe even another miracle. But the Plano Cruzado turned buying and selling practically anything into an exercise in forecasting the future and thus, ultimately, a gamble. Because this plan, more so than its predecessors, depended on the cooperation of consumers, industrialists, and retailers, its failures led to the erosion of public confidence in democratic governance at this crucial juncture. As Lúcia Pacífico Homem, president of the Movimento das Donas de Casa de Minas Gerais, proclaimed in June 1987: “I will be a watchdog over my own pocketbook. For Sarney, never again.”¹¹⁰

Amid the dramatic economic reversals of the 1980s, Brazil’s miracle became a distant memory, evoked by some in their mocking commentary on how Brazil was still the country of the future. Officials asserted their predictions with arrogance, only to be proven woefully wrong at every turn. When Finance Minister Funaro prophesized that “the year 1987 will have lower inflation than 1986,” he would ultimately be off by a factor of seven.¹¹¹ In light of inconceivable numbers and accumulating hardships, Brazil cycled through ministers; some had their terms cut short by scandals and others simply admitted defeat. In June 1987, Luiz Carlos Bresser Pereira, finance minister from April to December 1987, defensively retorted: “I’m a minister, not a magician.”¹¹²

As skeptical—and sneering—as Brazilians sounded when asked about how their government handled the inflationary crisis, it becomes even more striking that they remained optimistic about the ongoing project to design a new political system. Writing the 1988 Constitution was a public and participatory event. From 1986 to 1988, Brazilians organized working groups to draft amendments and sent thousands of petitions to delegates. Their letters, preserved at the Museu da República in Rio de Janeiro, reveal citizens’ hopes for Brazil’s future. Some offered lengthy and highly theorized political manifestos while others wrote rushed letters, sometimes with incomplete sentences or incongruous demands. Working within the limits of the institutions created to govern the democratic transition, petitioners nonetheless expressed their desires to overturn the status quo, to totally reimagine government and its powers. Their proposals spanned the ideological spectrum, including many idiosyncratic suggestions. These letters also documented everyday hardships of poverty, exclusion, and violence. Many letter writers asserted their authority to advise the constitution writers on account of how their firsthand experiences empowered them to articulate the needs of ordinary people. Brazilians worked to define new principles of democracy, which also created spaces to debate Brazil’s economic future.

This process of writing the 1988 Constitution provides an unexpected window into the hyperinflation unfolding, as inflation reached 432 percent in 1987 and surpassed 1,100 percent in 1988 (fig. 3). Discussion of the crisis could not be avoided, especially as the initial euphoria of the Plano Cruzado gave way to higher prices, empty shelves, and more conflicts over profits and property. The Plano Cruzado also inspired debates about democratic governance. In August 1986, for example, legal scholars debated proposals to eliminate the decree law and how the executive branch used this instrument to legislate without congress. The Plano Cruzado inspired arguments for and against decree laws. For one law professor, the Plano Cruzado was “the first time that the decree law was used on behalf of the people,” but even so, he warned, “it is a dangerous instrument.”¹¹³ For the political scientist Bolívar Lamounier, however, the Plano Cruzado bolstered his argument that the tool should be reformed but not abandoned; otherwise, how could government intervene during a crisis “without the element of surprise with the decree law?”¹¹⁴ Whereas some debated the possibilities for democracy in technical terms, others offered idealism over and above specific instructions. Pointing to the “failure of the Plano Cruzado,” one manifesto from Rio Grande do Sul called on Brazilians to “remember Adam Smith”—not for his advocacy of free trade but for his insistence that “no society can be prosperous and happy if its members are mostly poor and unhappy.”¹¹⁵

After decades of military rule, and amid another crisis, writing this constitution was imbued with urgency and optimism. Delegates debated all aspects of social and economic life in Brazil, a process reflected in the length of the constitution, with 250 articles. It codified far-reaching promises to protect workers’ rights; uphold gender and racial equality; guarantee health care as a human right; defend the cultural, linguistic, and territorial sovereignty of Indigenous peoples; safeguard the environment; and so on. While inflation permeated debates over economic and social rights, no articles about it or protections against it were codified in the constitution, beyond mention of the government’s responsibility to defend the popular economy or economic well-being of popular classes, protections carried over from 1930s Vargas-era constitutions.¹¹⁶

Delegates advocating for measures to protect workers’ rights did push to include articles for automatic monthly adjustments to salaries linked to the cost-of-living index. They also proposed amendments calling for “constitutional and legal mechanisms to protect salaries against the eroding value of the currency.”¹¹⁷ These proposals were rejected. Others called for measures to protect consumers by increasing public powers to regulate weights and measures, prices, advertisements, and “general market conditions.” Such protections were to be included alongside other fundamental individual rights.¹¹⁸ These guarantees were also not codified.

Perhaps to omit concrete protections against inflation was a pragmatic choice. Constitutions are not designed to legislate but to outline fundamental rights and powers of government. Inflation was a matter for ordinary law, more of a technical problem or one too unpredictable to be subordinated to generalizable principles. The delegates might also have implicitly understood that to legislate inflation would invariably result in undemocratic or unfair outcomes. To some, inflation generates a predictable set of winners and losers. But if Brazilians had learned anything over the previous twenty years, it was that the only thing harder than controlling prices was forecasting how individuals respond. To codify inflation into the constitution would be to formally pick winners and losers, to decide which groups deserved protection in a crisis and who would have to make their own loopholes to safeguard their well-being and property. Any measure to hedge against future losses or protect the interests of one group against another would yield new conflicts. The 1988 Constitution affirmed economic rights as essential to Brazilian democracy, but the question of how to guarantee a fair price remained as unsettled and urgent as ever.

Decades of chronic inflation had turned every purchase into a tug of war in which prices determined the winners and losers. The military regime had chosen industrialists, middle-class consumers, and bankers as its winners, but how would Brazil’s fledgling democracy decide whose profits or property to protect? What goods and services were essential and how should their prices be regulated? Even as these questions remained in the ongoing debate, what was undeniable in these crisis-ridden decades was that for Brazilians, as the anthropologist Roberto DaMatta notes, “citizenship and inflation had become deeply intertwined.”¹¹⁹

Conclusion

The Plano Cruzado and its successors did not fix inflation, nor did the 1988 Constitution bring immediate political stability. By then, the once-celebrated economic miracle had become a faint echo of the past, and yet it remained a point of reference in public debates and in the popular imagination. Brazil’s economic miracle had two deeply intertwined afterlives. Some Brazilians evoked the past to bolster their hopes that “we will have a new miracle,” while others sighed with resignation that Brazil was still struggling as an “emerging power.”¹²⁰ And for most people, these conjectures about the country’s future potential offered little comfort as inflation reached 2,851 percent in 1993.

Prices skyrocketed alongside corruption scandals and political humiliations that further eroded public confidence. The most dramatic of these occurred in March 1990 with the confisco da poupança, the colloquial term used to describe when President Collor and Finance Minister Zélia Cardoso de Mello froze 80 percent of personal bank accounts in Brazil for eighteen months, an act that many decried as an arbitrary government seizure of assets. If the military dictatorship had fabricated data to conserve public confidence in its miracle, the irony of Brazil’s democratic transition became the farcical extent to which newly elected politicians disregarded the importance of popular support for their economic policies. Then, almost miraculously, the heterodox (and controversial) Plano Real “succeeded” in taming inflation. The economists who designed the Plano Real subsequently wrote books and memoirs to celebrate their radical program as a savvy mix of compliance with neoliberal reforms alongside rebellious commitment to experimentation and transparency.

And this is where histories of Brazil’s miracle and the subsequent debt crisis conclude, with the Plano Real. Scholars interrogate its neoliberal emphasis on privatization, open markets, and fiscal discipline, and they debate the social impact. Economists—some with resignation and others with conviction—see the Plano Real as the inevitable answer to the exhaustion of Brazil’s state-led and debt-financed developmentalist growth model that prevailed from the 1930s to the 1980s. Postwar inflation is thus either treated like any other macroeconomic variable or narrowly discussed to explain why failures to tame it left no option but eventual conformity to neoliberal praxis in the 1990s.¹²¹ But to understand how neoliberal formulas took hold after decades of heterodox policies, it is important to account not only for why past plans failed but also how they had already turned access to essential goods and services into individualized conquests. The key to how inflation transformed Brazilian society during these crucial decades lies not in debates over its eventual cure but in the seductive promises of all the preceding experiments.

It is easy enough to point out the faulty logic that defined policymaking, as much during the military dictatorship as during the country’s democratization, or to emphasize the differences between the military’s focus on growth at the expense of working classes and the attempts of democratic leaders to design anti-inflation plans that prioritized social mobility. Yet what connects these decades of experimentation is how policymakers tried to govern by different economic rules. From the 1960s to 1980s, Brazilian officials tested controversial ideas in pursuit of price stability; this, according to the former finance minister Guido Mantega, marked the country’s “greatest period of creativity” in generating new economic theories.¹²² And this creativity was not limited to government planning, as all Brazilians experimented with how to stretch their purchasing power and savings in these difficult economic times.

Brazil’s economic miracle is a story of both relentless optimism in the face of daunting realities and persistent skepticism in citizens’ responses to government promises for renewed prosperity. To contend with the consequences, the country’s economic performance needs to be evaluated not only with stark indicators—high growth rates, high levels of industrial production, growing inequality, galloping inflation, ballooning debt—but also for the experimental strategies and unconventional thinking of Brazilian economists and consumers alike. How did people deal with the economics of scarcity that accompanied high inflation? How did inflation shape democratic governance and expectations? These questions inspired this article’s multidecade analysis of Brazil’s miracle and its spectacular collapse. They are also questions that await further research—mine and, hopefully, that of other scholars as well. Inflation is more than a variable to be tracked and forecast. In Brazil, persistent inflation fused with struggles for democratic accountability, social mobility, and economic justice. This was—and remains—the case in Brazil, where inflation was not an exceptional event but a constant challenge that defined people’s livelihoods and opportunities for decades.

I would like to thank Amy Chazkel and Sarah Seo for the invitation to present an early version of this article to the Legal History Workshop at Columbia University, and all the workshop participants for their questions, feedback, and suggestions. Valeria Lopez-Fadul also read and offered invaluable feedback. In addition, I thank the entire RHR editorial team and coeditors of this issue Ravinder Kaur and Barbara Weinstein for their feedback and support throughout the revision process, and the anonymous reviewers for their diligence and instrumental comments.

Notes

References