20 Reais – Brazil

In 1995, Brazil's currency situation was defined by the Plano Real, a bold stabilization program launched in July 1994 under Finance Minister Fernando Henrique Cardoso. The plan's cornerstone was a new currency, the Real (R$), which was initially pegged to the US dollar through a semi-fixed "crawling peg" exchange rate band. This mechanism was crucial for breaking the inertial inflation that had plagued the country for decades, as it anchored prices and restored public confidence by providing a stable unit of account. The immediate success was dramatic, with annual inflation plummeting from over 2,000% in 1994 to just 22% in 1995.

However, the stability came at a significant cost. The strong, overvalued Real led to a surge in imports and a widening current account deficit, as Brazilian goods became more expensive abroad and foreign products became cheap domestically. To defend the currency peg and attract the foreign capital needed to finance this deficit, the Brazilian Central Bank was forced to maintain extremely high interest rates. While this succeeded in controlling inflation and stabilizing the currency in the short term, it also stifled economic growth and increased the government's debt servicing costs.

Consequently, 1995 was a year of fragile equilibrium. The government, now led by President Cardoso, was engaged in a difficult balancing act, using the currency anchor to consolidate the victory over hyperinflation while simultaneously implementing fiscal reforms to address the underlying structural deficits that the Plano Real had exposed. The situation highlighted the inherent tension of the exchange rate anchor: it was an effective tool for ending inflation but created vulnerabilities in external accounts and public debt that would pose severe challenges in the years to come, culminating in the 1999 currency crisis.