Brazil to Fight Inflation With New Currency

Associated Press

President Jose Sarney, declaring a “war of life and death against inflation,” today announced sweeping economic changes that include a new Brazilian currency, the cruzado.

Sarney, speaking live on network radio and television, decreed an indefinite freeze on prices and the end of automatic cost-of-living adjustments called indexing.

The president said businesses that illegally mark up prices will be shut down and those responsible will be jailed.

A cruzado becomes worth 1,000 cruzeiros, about 7 cents.


Sarney called inflation “public enemy No. 1" and said it was “stealing bread” from Brazilians’ mouths. On Thursday, the government reported that inflation reached an annual rate of 255%, the worst in Brazil’s history.

Brazil’s monthly inflation rate is believed to be the highest in the world: 16% in January and 14.3% in February. Its foreign debt is $103 billion, the highest in the Third World.

Sarney, however, said Brazil’s new economic measures will not interfere with economic growth, estimated in 1985 at 8%, the highest since the 1970s.

Workers will get pay raises of more than 33% effective Saturday, but cost-of-living raises afterward will be determined by the government. Before, there were automatic cost-of living increases twice a year.

Rents and mortgages were frozen at current levels for a year.

Government-guaranteed savings and loan accounts, the main form of savings for millions of Brazilians, will pay inflation adjustments every three months, instead of monthly. This was the only exception to the general yearlong freeze on indexing.