Why is Brazil so expensive?

Brazil is by no means a cheap place to live. Especially for those working for minimum wage, which currently stands at BRL 954 – around USD 250 – per month. Price hikes in Brazil are explained by a multitude of reasons, from a sheer lack of infrastructure to high levels of taxation and corruption. All of these hurdles are simply referred to as the “Brazil cost,” and represent a major obstacle for competitiveness, investments, and consumption.

But exactly how much does it cost to live and do business in Brazil?

A British worker can pay for a jar of Nutella after 33 minutes of labor, while his Brazilian counterpart must work for 9 hours and 30 minutes to afford the same jar, InfoMoney reported.

Exame magazine noted that when the iPhone X and Sony’s PlayStation 4 were launched, it would be less expensive to buy a roundtrip ticket to Miami and purchase the electronics there, rather than pay what was being asked by Brazilian stores.

If you are looking for more robust academic evidence, the Big Mac Index is a light-hearted but widely accepted metric used to compare international prices – and the latest data compiled by The Economist is discouraging for Brazilian consumers, who pay USD 5.10 for the sandwich. That places Brazil as the sixth-most expensive entry in a ranking of 58 countries, tied with Italy and France, and leaving behind places known for their high living costs, such as Denmark.

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Things don’t get any better when it comes to more essential goods, such as gas. In the first quarter of 2018, Brazil ranked sixth out of 61 countries on the proportion of consumers’ wages which are spent on fuel. According to Bloomberg, Brazilian drivers use on average 203.43 liters a year, which eats up 2.5 percent of their salary.

As you can see, there is no shortage of examples on how expensive life in Brazil can be. But why is that so?

In short, the “Brazil cost” is the result of a complex combination of a lack of infrastructure and low productivity, which increase production costs, high interest rates, and taxes. To make matters worse, Brazilian politicians are known for their short-sightedness and penchant for favoring organized lobbies – which drains vast sums of money every year.

These problems prevent investments that could potentially solve most of the country’s deadlocks.

Bad infrastructure means higher costs

Infrastructure is one of Brazil’s main bottlenecks. The country ranked 73rd out of 137 analyzed by the World Economic Forum’s (WEF) Global Competitiveness Report 2017-2018. When it came to the condition of roads, the mode of transport which dominates in Brazil, the country fell to 103rd place. The Brazilian Report has already shown how problems in that area hold back Brazil.

In recent years, transportation accounted for nearly 60 percent of total logistics costs for businesses in the country, according to the WEF. Brazil’s National Confederation of Transport (CNT) estimates that shipping companies...