President Itamar Franco - 1992-1994

Senator Itamar Franco (Liberal Party-Minas Gerais) had been chosen as Collor's running mate for three reasons: Minas Gerais had the second largest electorate; Franco had led the impeachment CPI against Sarney's alleged corruption; and Franco was the ideal anti-impeachment "insurance" because of his idiosyncratic nature. During the 1989 campaign, Franco had threatened to resign several times and later voiced outspoken opposition to some Collor policies, especially concerning privatization. As president, Franco immediately installed a politically balanced cabinet and sought broad support in Congress.

Franco's presidential style was the opposite to that of Collor. A man of more simple habits and tastes, Franco refused the imperial, ceremonious presidential role. However, he proved to be quite temperamental, and many of his appointments were ill-conceived and short-lived. His most serious difficulty was defining an optimum economic strategy and selecting a minister of finance. After successively appointing two politicians and an academic economist to head the Ministry of Finance, Franco moved Senator Fernando Henrique Cardoso (PSDB-São Paulo) from the Ministry of Foreign Affairs to Finance in May 1993.

The political difficulties of President Fernando Collar de Mello, and his succession by Vice President Itamar Franco, led to a delay in the privatization movement. Franco had been openly critical of how privatization has been carried out. He slowed Collor's privatization program to a near standstill and reverted to a developmentalist, nationalist model that was based on a national plan to guide the country through a series of stages of development, eventually culminating in modernization. The Brazilian government introduced a bill to regulate its privatization program, giving president Itamar Franco direct control of the process. Brazil's minister of economy Paulo Haddad said the bill would harmonize the positions of development bank BNDES and the government; BNDES continued to coordinate the program, but would have no voting power. In addition, the bill would bring more power to the privatization commission to keep or change the scheduled auctions to privatize state-owned firms. For the petrochemical sector, the latest time-table puts the delayed selloff of polyethylene maker Poliolefinas on March 19, naphtha cracker Petroquimica Uniao on March 28, and fertilizer maker Ultrafertil on April 12, 1993.

Brazilian law enforcement efforts were hampered in 1992 by the political crisis engendered by the impeathrnent and forced resignation of President Fernando Collor de Mello. The new government of President Itamar Franco named a series of Justice Ministers and reorganized the police forces. President Franco declared that increased emphasis would be placed on capping drug trafficking in 1993.

In October 1993, Congress installed a CPI to investigate its own members involved in a far-reaching scandal within the joint budget committee. The scandal had begun during the Sarney period and extended into Franco's government. In addition to investigating possible involvement of some fifty members of Congress and identifying the "corruptors" in the private sector, the investigations unmasked a conspiracy ring within the executive branch that involved several middle-level bureaucrats. Distraught by the scandal reaching the executive branch, President Franco contemplated resigning. However, cooler heads persuaded him not to, and instead the president appointed several distinguished citizens to a Special Investigating Commission (Comissão Especial de Investigação--CEI) headed by the SAF (Federal Administration Secretariat) chief. Some of those involved in corruption were fired. Franco also appointed several military officers to civilian positions in the Ministry of Transport, Federal Police, and Office of the Federal Budget Director, which had difficult problems.

With Fernando Henrique Cardoso's PSDB (Brazilian Social Democracy Party) team installed at Finance, the Franco government became less erratic, and the kitchen cabinet's influence somewhat diminished. Beginning in December 1993, the Government introduced the Real Plan, an economic stabilization program intended to reduce the rate of inflation by reducing certain public expenditures, collecting liabilities owed to the Government, increasing tax revenues, continuing to privatize government-owned entities and introducing a new currency. The real was introduced as Brazil's currency in July 1994, based on a monetary correction index, the URV, introduced earlier in the year. Under the Real Plan, the rate of inflation decreased significantly, and the rate of growth of real gross domestic product increased substantially.

However, inflation had increased from 25 percent to 45 percent by April 1994, when Cardoso resigned to run for president, a month after his new stabilization plan went into effect.

The economic stabilization plan took into account all the errors of the Cruzado Plan of 1986, and both Cardoso and his team were aware of its potential effect on the 1994 elections. Because of the great success of the Real Plan, President Franco's approval rating soared to nearly 80 percent at the end of his term. Cardoso was elected President of Brazil in October 1994 and took office in January 1995 for a single four-year term. He generally sought to continue the economic stabilization and liberalization policies he developed as Finance Minister from May 1993 through April 1994 under President Itamar Franco. By some accounts, the Franco-Cardoso transition was the most tranquil in Brazilian political history.

But by 1999 political tensions between the newly re-elected President Fernando Henrique Cardoso and the thwarted presidential hopeful Itamar Franco (who was the former President and newly elected governor of Minas Gerais) contributed to the economic brinksmanship in the early part of the year between the Congress and the President. Investor concerns were exacerbated in early January 1999 when Itamar Franco, the newly elected governor of the economically powerful state of Minas Gerais, declared a moratorium on his state's debts with the federal government. Since Franco is a former president, his actions were widely viewed as further evidence of Brazil's difficulties in overcoming regional and special interests in dealing with critical national problems. The financial markets lost confidence in Brazil as a result, and foreign leaders became unwilling to roll over maturing loans or to extend new credits to Brazilian borrowers. The country's foreign exchange reserves fell sharply, forcing the government to float its currency in mid-January. Perhaps to emphasize to Congress the need pass key legislative reforms in the fiscal area, President Cardoso allowed the Real float, sacrificing the centerpiece of his economic plan.

Franco is known as the leader who helped put an end to runaway inflation in Brazil. He instituted a program called the Real Plan, which is credited with stabilizing the nation's economy. Franco later served as governor in his home state of Minas Gerais and as a senator from the state.

Former President Itamar Franco died July 6, 2011 after a battle with leukemia. Franco died at Albert Einstein Hospital in the city of Sao Paulo after becoming sick with pneumonia. He was 81. He was still a senator at the time of his death.