Cardoso II — Real devaluation, inflation targeting, Fiscal Responsibility Law

Doctrine — stated goals and content

Second-term entrenchment of Real Plan credibility through floating exchange rate + inflation targeting + fiscal rules. Five doctrinal pillars: (a) Real devaluation 13-18 January 1999 — after October 1998 re-election victory, speculative attack exhausted reserves ($75B → $36B); 13 Jan 1999 widening of crawling band, 15 Jan 1999 full float under new BCB Armínio Fraga; real depreciated R$1.21 → R$2.00 by March. (b) Inflation-targeting adoption (Decreto 3.088 of 21 June 1999) — 8% target 1999, 6% 2000, 4% 2001; BCB Copom system; Taylor-rule operating framework. (c) Lei de Responsabilidade Fiscal (LRF, Lei Complementar 101 of 4 May 2000) — binding fiscal rules on federal/state/municipal spending, debt ceilings, transfer restrictions ahead of elections; paradigm-defining fiscal-rule institutional reform. (d) Fome Zero groundwork — Bolsa Escola (Apr 2001, Law 10.219), Bolsa Alimentação, Vale-Gás consolidation set stage for Lula-era Bolsa Família (2003). (e) IMF programs — Nov 1998 $41.5B standby; Aug 2001 $15B augmentation amid Argentine contagion; Sep 2002 $30B pre-election standby. Stated school: market-liberal stabilisation + Neoliberal institutionalist + social-investment floor. Left-right: centre- right economically, centre socially. Popularity: Oct 1998 re-elected first round 53.1% vs Lula 31.7% (unprecedented); approval fell sharply post-devaluation to ~20-30% by 2002; Oct 2002 Lula (PT) won 61.3% runoff. Coherence: trade short-term currency-peg credibility for inflation-targeting + LRF rule-based stabilisation architecture that survived the Lula transition — a quiet institutional success despite electoral-coalition defeat.