Brazil's government has declared Friday a bank holiday and will announce a major package of economic measures to combat domestic inflation, which is running at an annual rate of 400 percent.
President Jose Sarney is planning to announce the program to his cabinet and on television. The bank holiday was declared to prevent the plan from disrupting the banking system, a presidential spokesman said.
According to officials, the plan will include a temporary freeze on prices, and wages will be adjusted according to a table that begins the process of ending indexation. Wages in Brazil currently are indexed against inflation, and workers get pay increases at six-month or even three-month intervals so that they can recover their lost purchasing power.
Labor leaders say the system is essential to protect people against inflation and wage increases should be made more frequently. But some economists say the system entrenches inflation and makes it very difficult to reduce the price spiral.
Holders of Treasury bonds may find their real value eroded as a means of diminishing the government's domestic debt, calculated at more than $20 billion.
Finance Minister Dilson Funaro denied that any major devaluation of the currency was planned, and said the package would ensure "stability and growth."
A spokesman for the presidential palace said Sarney would give "the basic outlines for a new economic policy maintaining the option for growth and combatting inflation. This time we are not just keeping inflation under control but dealing it a real blow."
Officials have kept this "heterodox shock" package under wraps since Christmas, but its adoption was prompted by last week's major cabinet reshuffle and a marked worsening of inflationary expectations.
Asked if the measures would include currency devaluation against the U.S. dollar, Funaro said "no way."
The announcement of the bank closure came after a day of ministerial meetings. A presidential source said Sarney met into the early morning with Funaro and other key economic and political ministers.
On the black market, the dollar, which officially is quoted at 13,750 cruzeiros, jumped from its Wednesday rate of about 18,000 to about 20,000, but without sellers, dealers said.