My wife has been watching the TV Globo news-apparently, inflation is taking off. Rice is up 12%, beans, 7%, sugar-about 5%.
Is Brazil headed for hyperinflation (similar to 19 years ago)?
Well, I’m no economist. Inflation is a consistent, recurring problem in Brazil. Combating, minimising, or avoiding inflation is the #1 priority of government economists and the central bank. In recent years the government has been able to stay very close to the inflation target of IIRC 4.5% +/-2% - the global financial crisis didn’t help, of course, but they haven’t tended to be far off. While the numbers you posted may indicate that inflation is increasing (we’ll have to see over a longer term - there’s also the possibility of the government manipulating the other prices in the cesta básica, the group of goods used to benchmark inflation numbers), I don’t think hyperinflation is even a possibility in the near future.
That said, I’m worried about a few systemic… weaknesses, shall we say. Let’s leave aside bureaucratic issues for a minute and look at things one can put numbers to. Brazil, as of November last year but I think still today, had/has the highest effective interest rate in the world, so the cost of getting a bank loan is prohibitive. Prices for manufactured goods (with exceptions like textiles) produced in Brazil are exorbitant: for example, the stereotypical cheap&cheerful family car here is the VW Gol, a VW car designed and built in Brazil. For the price of a Gol in Brazil, you could buy two Gols in Mexico (remember, Gols are built here - so they’re half price even after shipping to Mexico, import duties and taxes, etc.). For the price of a Gol in Brazil you could allegedly buy a Camaro in the US - which in turn costs the same as 4 Gols in Brazil. Import tariffs on foreign cars are so high that they must be intended as an attempted import ban - yet even so cars imported from China with the same (lousy) quality and performance as a Gol still manage to be cheaper! Another example - buy an iPhone 4S on the Brazilian Apple store and you’ll pay R$1,999. An unlocked iPhone 4S on the US Apple store is US$549, or R$1,111. Aren’t they made in China either way? I don’t have a good explanation for why normal goods, especially electronics, have to be so expensive. A lot of them are produced here so shouldn’t face the import tax troubles, all the electronics on the market are behind on the technology curve, and a lot of goods simply aren’t available. (Incidentally, IME Brazilian-made electronics are more expensive than second-rate Chinese knockoffs, and of worse quality.) The demand for electronics is huge, though. I’m guessing the high prices are a combination of a small number of legitimate sellers with bureaucratic obstacles to generating more competition (so, in effect, virtually a cartel), finite supply (lousy infrastructure is an obstacle to boosting supply even of domestic goods - and don’t even mention the ports for shipping in imports), and a consequent ability to put profits as high as one’s degree of shamelessness will let them.
Well. I do know one definite contributing factor to inflation here. The proportion of legal employment (as in jobs that are registered with the national pension system, are in accordance with labour law, and are taxed) has risen considerably and consistently; the minimum wage has risen considerably over the past decade; and it seems like every damn day some union is on strike for far-above-inflation pay raises. (I’m in favour of unions in principle. However, here, labour law requires that one day’s work per year of every worker is paid to their assigned union whether they want to or not, so the unions tend to be unrepresentative and are likely corrupt, every single one of them) These strikes are almost always successful, at least on the majority of their demands, and can take many months. (My work permit was delayed because of a 10-month strike at the Ministry of Labour) So, with everyone’s salary going up in the end, inflation is inevitable.
Maybe the rest of above-average price increases on foodstuffs is just from a bad planting season? I don’t know.