200 Réis – Brazil

In 1886, Brazil's currency situation was characterized by profound instability and inflationary pressures, a legacy of the Paraguayan War (1864-1870) and the policies of the Brazilian Empire. To finance the massive war effort, the government had extensively issued inconvertible paper money, known as papel-moeda, severing its link to gold. By 1886, the paper milréis had depreciated significantly against sterling, and the economy operated on a de facto fiduciary standard with a floating exchange rate. This environment created a sharp divide between two economic sectors: internal transactions conducted with depreciating paper currency, and the export economy (dominated by coffee) which dealt in gold-backed foreign exchange, leading to frequent disputes over exchange rate policies.

The financial debate of the era was polarized between the metalistas (backers of a return to the gold standard) and the papelistas (who advocated for a flexible, managed paper currency). The metalistas, often linked to import merchants and foreign creditors, argued that sound money was essential for long-term investment and international credibility. Conversely, the papelistas, supported by powerful coffee planters seeking cheap credit and a weak currency to boost export profits, resisted a swift return to convertibility, fearing it would trigger a painful deflation and credit contraction. The government, under the Conservative Cabinet of the Baron of Cotegipe, was caught in the middle, attempting gradual deflation but lacking the political will or fiscal surplus for a decisive monetary reform.

Consequently, 1886 found Brazil in a holding pattern of monetary uncertainty. The Treasury engaged in occasional interventions to support the milréis and slowly reduce the paper money in circulation, but these measures were inconsistent. The unresolved currency question exacerbated broader economic tensions and was symptomatic of the Empire's weakening grip on a changing society. This financial fragility would persist until the aftermath of the Republic's proclamation in 1889, which eventually led to the Encilhamento, a period of wild monetary expansion and speculation.