Brazil's economy: the currency that finally held

How Brazil lived from one boom to the next

Britannica describes Brazil's economic history as a cycle of booms and busts. For four centuries the country lived on one or two export goods at a time, each dependent on prices set abroad. Brazilwood came first. Sugar from the northeastern plantations followed. The eighteenth century belonged to the gold and diamonds of Minas Gerais, and after them came coffee from the middle of the nineteenth century and Amazon rubber between the 1880s and the 1910s.

Coffee lasted longest. It was introduced in 1720, and by the early twentieth century it accounted for 16% of gross national product and three quarters of export earnings. Coffee planters from São Paulo and Minas Gerais ran the federal government between 1894 and 1930, and in 1906 three coffee states set up a federally backed scheme to buy the surplus crop and keep it off the world market. The rubber boom turned Manaus into a city with electricity, streetcars and an opera house, and ended abruptly in the 1920s, when incomes in the region fell back to their level of the 1870s.

Why the state built the factories

The collapse of coffee prices in 1929 and 1930 ended that model. From the 1930s the government set out to make at home what it had imported, using tariffs, tax incentives, import restrictions and its own capital. It took stakes in large companies and founded others outright: Petrobras, the national oil company, in 1953, a motor vehicle industry in the 1950s to replace imports from the United States and Germany, shipyards, a petrochemical sector, a computer industry and the aircraft maker Embraer. For a period in the late twentieth century manufacturing was the largest part of gross domestic product, before services overtook it. By 2011 services made up 67.0% of GDP, industry 27.5% and agriculture 5.5%.

The building came at a price that was paid in the currency. Under the Kubitschek government, which built Brasília, the cost of living and the money in circulation both tripled between 1956 and 1961 while the foreign debt nearly doubled. The military government that took power in 1964 cut inflation from 86% that year to about 41% in 1966 with credit controls and wage restraint, before the fast growth of the early 1970s.

The 1990s reversed part of this. The government sold dozens of state companies, several large steelmakers and the mining conglomerate Companhia Vale do Rio Doce among them, and sold a minority of Petrobras shares while keeping control. Vale itself was split into separate mining and shipping businesses. Petrobras raised about $70 billion in a further share offering in 2010, and the state retained its majority.

How inflation was finally stopped

Inflation ran through the whole of the late twentieth century. Britannica traces it to deficit spending, subsidised industrial credit and foreign borrowing, and to the habit that made it permanent: nearly every contract, wage and price was indexed to the constantly corrected value of government bonds, so each month's inflation was written into the next. Six stabilisation plans between 1985 and 1993 failed. The Cruzado Plan of 1986 froze prices and produced shortages; Collor's plan of 1990 blocked access to bank accounts for eighteen months. At times inflation reached 25% a month.

The Real Plan, designed in the second half of 1993, worked by announcing every step in advance and freezing nothing. It had three phases. A fiscal adjustment came first. From 1 March 1994 prices, wages and contracts were converted voluntarily into a unit of account called the URV, the Unidade Real de Valor, which the central bank corrected daily and which was pegged to the United States dollar; one URV was worth 647.50 cruzeiros reais on the first day. On 1 July 1994 the URV became the new currency, one real to one URV. More than 940 million banknotes and 688 million coins had been distributed in the two months before.

The central bank records the result. Annual inflation measured by the IPCA fell from 4,922% in June 1994 to 916% in December 1994 and 22% in 1995. The old cruzeiro real notes stayed in circulation until September 1994. Inflation targeting was adopted in 1999, and Complementary Law 179 of 2021 now charges the central bank with meeting the target set by the National Monetary Council.

The regime has had bad years. Between 1999 and 2024 the target was missed in eight of them, and each time the central bank's governor wrote an open letter to the finance minister explaining why. Since January 2025 the target has been continuous: 3%, plus or minus 1.5 percentage points, measured on a rolling twelve months and counted as missed only after six consecutive months outside the band. The twelve-month rate was 4.22% in August 2026.

Confidence in the currency took longer than the currency. In the months before the presidential election of 2002 the real fell and Brazil's risk rating dropped, as investors reacted to the programme of the opposition candidate; both recovered after the new government kept its predecessor's policies. By mid-2004, Britannica records, inflation had come down far enough for Brazil to issue bonds in its own currency for the first time, where every earlier issue had been in dollars.

What the farms and the mines sell abroad

The Observatory of Economic Complexity puts Brazil's exports at $354 billion in 2024, up from $233 billion in 2019.

The buyers are as concentrated as the goods. China took $95.9 billion in 2024 and the United States $41 billion, followed by Argentina at $13.8 billion, the Netherlands at $11.8 billion and Spain at $9.94 billion. The monthly figures show the same shape: in July 2026 Brazil exported $34.1 billion, $10.7 billion of it to China, and ran a trade surplus of $7.07 billion. Imports that month came mainly from China and the United States, and refined petroleum led them at $2.09 billion.

The United States Department of Agriculture puts the scale of the farm sector in shares of world output. For the 2025/2026 marketing year it estimates Brazilian soybean production at 180.5 million tonnes, 42% of the world's, grown on 48.5 million hectares; coffee at 63 million sixty-kilogram bags, 35% of world production; and orange juice at 76% of the world total. Beef output was estimated at 12.61 million tonnes.

What comes out of the ground

Brazil's mineral wealth lies mostly in two states, Minas Gerais and Pará, which hold the bulk of its iron ore, bauxite and gold. Britannica notes a pattern unusual in Latin America: Brazilian industry absorbs most of the country's own mineral output, with the exception of the iron ore of the Carajás region in Pará, which is largely exported. The Wikipedia article on the economy gives 2019 output of 405 million tonnes of iron ore and 88.9 thousand tonnes of niobium.

Mining has its own history of rushes and disasters. Tens of thousands of independent prospectors, the garimpeiros, crowded into Serra Pelada in Pará during the gold rushes of the 1980s and 1990s. In January 2019 a tailings dam at the Córrego do Feijão iron ore mine near Brumadinho, operated by Vale, collapsed without warning; about 10 million cubic metres of mining waste swept through the neighbouring communities, contaminated more than 200 kilometres of the Paraopeba River and killed 272 people. Britannica notes that the fines the environmental agencies impose on mining companies are often small and their oversight lax.

How the savanna became farmland

Most of the soya does not grow where Brazil's farming began. The cerrado, the savanna of the central plateau, was long used only for thinly spread cattle, because its soils are acid and poor. From the 1970s acidity correction, fertiliser, plant breeding and machinery made it usable for soybeans, and the Center-West became the frontier of Brazilian agriculture. Britannica notes that farmers in Mato Grosso do Sul in particular turned to machinery and fertiliser to work the savanna soils, and INPE's clearance figures show where the frontier presses on the forest: Mato Grosso was the one state of the Legal Amazon where clearing increased between 2024 and 2025, by 26.73%.

The contrast within the countryside is sharp, and it is regional as much as social. The Northeast contains about half of Brazil's farms, but most cover five hectares or less, and Britannica records that few tractors work there and that even the sugar plantations rely on manual labour. The Landless Workers' Movement has organised protests and occupations of land to press for reform, and the government began redistributing land on a large scale in the 1990s.

The regional gap shows in the older income figures as well. In 1994 income per head ranged from US$7,089 in the Federal District and US$4,666 in São Paulo state to US$835 in Piauí, in the Northeast.

Where the energy comes from

Rivers supply most of the power. Britannica puts hydroelectricity at nine tenths of the country's electricity, with the dams concentrated in the Southeast and the South where the demand is. Itaipu, on the Paraná at the border with Paraguay, began operating in 1984, and Tucuruí on the Tocantins in the mid-1980s. Two nuclear reactors stand at Angra dos Reis, Angra I from 1982 and Angra II from 2000, and a gas pipeline from Bolivia opened in 1999.

Oil comes mainly from under the sea. Drilling was confined to the Bahia basin north of Salvador from 1940 until the 1960s; today more than two thirds of production comes from the Campos basin off Rio de Janeiro state. In the early twenty-first century Petrobras confirmed that the Tupi field, about 6.9 kilometres below the surface, held five to eight billion barrels of oil and gas.

The fuel in the tank is partly cane. A government programme begun in the 1970s replaced imported petrol with ethanol distilled mainly from sugarcane; for a few years almost every new car in Brazil was built to run on it, and many engines now burn fuel that is a fifth to a quarter ethanol.

Who shares in the income

The currency was stabilised long before the distribution was. By the 1990s more than one Brazilian in four lived on less than a dollar a day. The Bolsa Família cash transfer programme accounted for an estimated two thirds of a 14% rise in the incomes of the poorest in 2004, and child malnutrition fell by 46% over the first term of the government elected in 2002. Under the government of 2019 to 2022 the number of people facing hunger rose to 33 million, from 19.1 million less than two years earlier, according to the Wikipedia history of Brazil.

Growth has come in long runs and sharp breaks. The economy expanded at an average of over 5% a year between 2000 and 2012, entered recession in 2014, shrank by more than 4% in the pandemic year of 2020, and according to figures IBGE released on 3 March 2026 grew by 3.4% in 2024 and 2.3% in 2025.