Under finance minister (later president) Fernando Henrique Cardoso, economists including Pérsio Arida, André Lara Resende, Edmar Bacha, Gustavo Franco and Pedro Malan first adjust the budget, then introduce the URV (Unidade Real de Valor), a virtual unit of account indexed daily. Once prices are quoted in URV, it becomes the real (July 1994). Inflation falls from ~2,500% (1993) to single digits by 1997 without a freeze.
Try: filter to “→ state” and then “→ markets”. Notice the rhythm — statist turns tend to come in booms, liberal reforms after crises (1898, 1964, 1994, 2016–19).
Try: switch on money growth and hover 1986–1994: every freeze (red) dented inflation briefly while money kept growing, so it came back. Only the Real, which fixed the budget and money first, stuck. Rounded figures (IGP-DI before 1980, IPCA after); money series is stylized. See Friedman for why inflation is “always and everywhere a monetary phenomenon” — and note that in Brazil the money was printed to cover deficits, so the root was fiscal.
Try: play the Cruzado with money growing 4%/month — the freeze looks like a miracle for a few months while inventories last, then the shelves empty and the ágio climbs until the freeze breaks and inflation comes roaring back. Turn enforcement off and the premium shows up openly instead of as empty shelves. Then switch to the Real: no freeze, no shortages; the URV lets prices realign first, and inflation after July stays low only if money growth stays low (try 6%). A toy model with stylized parameters. See Sowell on price controls and Mises on interventionism.
Simonsen: A national planning body, because private markets in a poor agrarian country will not create heavy industry on their own.
Gudin: Prices and entrepreneurs. Planners lack the information to pick sectors and will be captured by the industries they favour.
Simonsen: Industry is the path to wealth; exporting coffee keeps Brazil dependent on volatile world prices.
Gudin: Productivity is the path to wealth. Raise it in farming and services too; industrialise where Brazil is competitive.
Simonsen: High tariffs and import controls to let 'infant industries' grow up.
Gudin: Protection makes consumers pay more for worse goods, and infant industries rarely grow up while they are protected.
Simonsen: State credit and investment; inflation is an acceptable price for growth.
Gudin: Inflation is a hidden tax that distorts every price; first stabilise money, then growth follows.
Try: compare growth to 1980 and after 1980 for each strategy, then push inflationary finance to 100%. Planning wins the first 35 years and the crisis comes sooner and deeper; the steady path compounds without a lost decade. The honest caveat: Brazil really did grow ~7% a year under import substitution, and East Asia shows planning with export discipline can work — though it needed a state able to cut off failing firms, which public choice warns is rare. Gudin's knowledge argument is Hayek's and Mises's; the comparative-advantage argument is Ricardo's.
Brazil's ~1,500 hours was the highest of the 190 economies surveyed — about two full-time months of accountants. The 2023 VAT reform is meant to attack exactly this.
Source (approximate, rounded): World Bank, Doing Business 2019/2020 (paying taxes, mid-sized firm).
Try: click through Tax compliance, Opening a business and Enforcing a contract — Brazil's extremes are about rules and time, not just money. Then Tax burden: rich-country taxes at middle-income incomes.
Rounded and smoothed from Maddison Project and World Bank series; shape and scale only.
Try: switch to “% of US level”. Brazil climbed to about a third of US income by 1980 and has hovered near a quarter since — the middle-income trap. Korea, poorer than Brazil in 1960, kept climbing. Turn Korea and Chile off and on: the countries that pulled ahead opened to trade and kept money stable, though Korea did it with heavy state direction in its early decades (see the Gudin–Simonsen section above) and Chile with a dictatorship in the 1970s–80s (see the world map). Economists also stress Brazil's low savings and investment, weak school quality and stagnant productivity, which overlap with the Custo Brasil above.
Implement the CBS/IBS dual VAT with a single rate and few exceptions; simplify payroll and income taxes.
Try: start with “low-hanging fruit” — modest growth, high feasibility. Then hit “everything”: the growth path rises toward Chile's level by the late 2030s but feasibility collapses as a dozen interest groups line up against it. Switch to the post-crisis window and see why reformers say “never waste a crisis”. All effects are stylized from cross-country studies, with diminishing returns; real outcomes depend on design, sequencing and luck. Critics would add that some of these reforms raise inequality or insecurity in the short run, and that state capacity (health, education, infrastructure) matters as much as removing barriers.
Brazil's first political economist. Read Smith early, wrote Princípios de Economia Política (1804) and argued for the 1808 opening of the ports and free industry.
related: Adam Smith →O Abolicionismo (1883) argued that slavery, not race or climate, was the root of Brazil's backwardness: it degraded work, enterprise and the state. A monarchist liberal in the British mould.
related: Locke →A giant of civil liberties — habeas corpus, federalism, equality of nations at The Hague (1907). Nuance: as finance minister he backed the money-issuing banks behind the Encilhamento bubble. Liberal in law, not in money.
related: Mises: credit cycle →Engineer turned economist; helped found economics as a discipline in Brazil and its first economics journal. Debated Simonsen in 1944–45, opposing planning and inflationary finance.
related: Hayek →Began as a developmentalist (he helped found BNDE) and ended as Brazil's best-known liberal polemicist. Co-architect of PAEG and the Central Bank. Memoir: A Lanterna na Popa ('the lantern at the stern', 1994). His grandson Roberto Campos Neto led the autonomous Central Bank 2019–24.
related: Friedman →Gudin's disciple and Campos's partner in PAEG; ran SUMOC, the pre-Central Bank monetary authority, and pressed for the Central Bank's creation. Quiet, technical, orthodox.
Founded the Instituto Liberal (1983), which translated Mises, Hayek and others into Portuguese and seeded the liberal revival of the 1980s–90s.
related: Mises →Chicago-trained economist, adviser to Campos and Bulhões, and an intellectual anchor of the Instituto Liberal; wrote accessible essays on liberty and markets.
related: Friedman →O Liberalismo: Antigo e Moderno (Liberalism, Old and New, 1991) is a sweeping history of liberal thought. Merquior defended a 'social-liberalism' combining markets with education and opportunity.
related: Liberty →Chicago PhD, co-founder of Banco Pactual and Instituto Millenium. As minister oversaw the pension reform, the Economic Freedom Law, Central Bank autonomy and Eletrobras privatisation; broader privatisation and tax plans largely stalled.
related: Friedman →One of the URV's designers and a prolific liberal writer on money, history and institutions — including on how Brazilian inflation was a fiscal and political choice.
related: Friedman →The pioneer: translations, seminars and books that introduced Austrian and Chicago ideas to Brazilian readers.
The Instituto de Estudos Empresariais trains young business leaders and hosts the annual Fórum da Liberdade, which has brought speakers from Nobel laureates to heads of state.
A think tank for liberal and democratic values aimed at the press and public debate, co-founded by economists and journalists.
Austrian-school institute; translated a large library of Mises, Hayek, Rothbard and Hoppe and popularised the school online.
related: Rothbard →A liberal party that refuses public campaign funds, a youth street movement, and groups like Students for Liberty Brasil and Livres carried liberal ideas into electoral politics.
Try: filter to institutions — almost all of Brazil's liberal infrastructure was built by private citizens after 1983, in the shadow of hyperinflation.