Plano Collor

The Collor Plan (Portuguese: Plano Collor), is the name given to a collection of economic reforms and inflation-stabilization plans carried out during the presidency of Fernando Collor de Mello of Brazil, between 1990 and 1992. The plan was officially called New Brazil Plan (Portuguese:Plano Brasil Novo), but it became closely associated with Collor himself, with "Plano Collor" becoming its de facto name.

The Collor plan combined fiscal and trade liberalization with radical inflation stabilization measures. The main inflation stabilization was coupled with an industrial and foreign trade reform program, the Industrial and Foreign Trade Policy (Portuguese: Política Industrial e de Comércio Exterior), better known as PICE, and a privatization program dubbed the "National Privatization Program" (Portuguese: Programa Nacional de Desestatização), better known as the PND.

The plan's economic theory was previously laid out by economists Zelia Cardoso de Mello, Antônio Kandir, Álvaro Zini and Fábio Giambiagi. The actual plan to be implemented was written by Antônio Kandir and economists Ibrahim Eris, Venilton Tadini, Luís Otávio da Motta Veiga, Eduardo Teixeira and João Maia.

The plan was announced on March 16, 1990, one day after Collor's inauguration. Its intended policies included:

Three separate plans to stabilize inflation were carried out during Collor's two years in power. The first two, Collor Plans I and II, were headed by the finance minister, Zélia Cardoso de Mello. In May 1991, Zélia was replaced by Marcílio Marques Moreira, who carried out a homonymous plan, the Marcílio Plan (Portuguese: Plano Marcílio).

Brazil had suffered through several years of hyperinflation: in 1989, the year before Collor took office, average monthly inflation was 28.94%. The Collor Plan sought to stabilize inflation by "freezing" government liability (such as internal debt) and restricting money flow in order to halt inertial inflation.

The freeze caused a strong reduction in trade and output of industry. With the reduction in the money supply from 30% to 9% of GDP, the rate of inflation dropped from 81% in March to 9% in June. The government faced two choices: they could either hold the freeze, and risk a recession brought about by the reduction of economic activity, or re-monetize the economy by "unfreezing" money flow and risk the return of inflation.

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