Nearly a quarter of all people living in urban centers were living on less that a dollar a day, and by the mid 1980's, when democracy returned to Brazil, debt was in the $100 billions.
Through the 1980's and early 1990's, many economic reform plans were implemented in attempts to jumpstart Brazils economy. Plans such as the Cruzado Plan, the Bresser Plan, and the Collor Plans used strategies such as devaluing the currency by freezing prices, as well as privatizing government-operated entities. These plans were mildly successful in the short term by increasing consumption of goods, but inflation was still a large problem throughout the country. By spring of 1990 inflation was at an annual rate of 37,000%. The tough economic times led to antirust of the government by the public, and after the presidential seat changed hands from Fernando Collor to Itamar Franco, Cardoso found himself Minister of Finance in May of 1993.
Cardoso's first order of business was to address the obstacles Brazil faced with putting together a successful strategy. Due to high tariff barriers, limits on free trade, there was little Foreign Direct Investment in the country. Cardoso knew that without free enterprise and a stable inflation rate, Brazil would never be able to significantly better the economy.
Cardoso won the support of the public, while introducing his plans in 1993. He used this support as he ran for the presidency, and ultimately won, in 1994. By the time he took over as president, inflation rates were around 2,500%. Cardoso introduced a plan called the Real Plan, which was aimed at lowering inflation. He changed all cruzado prices, into the new currency the real, which was tied to the United States dollar. The real was allowed to float between a monetary band, with the Central bank using exchange reserves to buy or sell reals as needed to keep the price stable. Along with this the Central Bank limited the growth of the money supply and set new requirements on bank reserves.
