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Steep inflation and unemployment lead Brazilians to desperation

. Jan 17, 2021
Steep inflation and unemployment lead Brazilians to desperation Street market on Avenida Joana Angelica, downtown Salvador. Photo: Joa Souza/Shutterstock

This week, the Brazilian Institute of Geography and Statistics (IBGE) announced the country’s official inflation rate for 2020. With an overall increase in prices of 4.52 percent, the rise was steeper than market expectations and official targets, largely pushed by a 14.09 percent jump in food costs.

Indeed, what was the sharpest yearly increase in food prices since 2002 has taken a severe toll on Brazilians’ pockets. According to IBGE head researcher Pedro Kislanov, the pronounced food inflation came as a result of increased demand, the devaluation of the Brazilian Real, and commodity prices on the global market during the pandemic.

</p> <p>Prices of basic foodstuffs such as soybean oil and rice increased by 103.79 and 76 percent last year, respectively. Other major increases were seen in long-life milk (26.93%), fruits (25.4%), meat (17.97%), potatoes (67.27%) and tomatoes (52.76%).</p> <p>Moreover, it is important to note that inflation <a href="https://brazilian.report/business/2018/11/21/inflation-income-inequality-brazil-2006/">does not affect every segment of the population equally</a>. Low-income households spend a much higher percentage of their monthly income on food, meaning it is precisely the most vulnerable stratum of Brazil that is feeling the biggest pinch.</p> <p>Meanwhile, Brazil&#8217;s minimum wage will increase 5.26 percent this year, below the 5.45 percent rise in the National Consumer Price Index, traditionally used as a guide to update the country&#8217;s salary floor. This means that the 2021 minimum wage will have the lowest purchasing power since 2005, according to research institute Dieese.</p> <p>The new minimum wage will only be enough to purchase 1.58 basic baskets of necessities, which cost an average of BRL 696.70. Between 2010 and 2019, Brazil&#8217;s minimum salary has always been enough to buy at least two such baskets, with the exception of 2016, when the rate fell to 1.96.</p> <p>Indeed, 60 percent of Brazilian workers earn less than one minimum wage. The poorest half of the population receives an average of BRL 413 a month.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4623147"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <h2>Inflation and<strong> unemployment form a dangerous cocktail </strong></h2> <p>With unemployment rates hitting 14.2 percent in Brazil, think tank Fundação Getúlio Vargas predicts that this figure is unlikely to drop below 14 percent this year. In its analysis of 15 countries around the world, the think tank ranked Brazil as second worst in unemployment terms — only South Africa fared poorer.</p> <p>Indeed, falling income, unemployment, and bleak prospects have led Brazilian citizens to seek creative and less-than-ideal solutions to raise money. One of which concerns the 2016 Olympic Games in Rio de Janeiro. Four and a half years after the games, Olympic torchbearers from around the country are now <a href="https://lista.mercadolivre.com.br/tocha-olimpica-2016#D&#91;A:tocha%20olimpica%202016&#93;">selling their commemorative torches online</a>.</p> <p>Bianka Lins, the first transgender person to take part in the Olympic torch relay, is among those selling her mementos due to financial difficulties. With the pandemic drastically cutting her income as a teacher in Minas Gerais state, Ms. Lins was forced to sell one of her prize possessions.</p> <p>&#8220;The bills kept adding up. As I need to do some urgent renovation work on my house, I decided to put my torch up for sale,&#8221; she said. &#8220;The torch relay was one of the most important moments of my life. As the first trans woman to carry this symbol in Brazil, I saw myself representing thousands of people from the LGBTQIA+ community. It&#8217;s not easy for me to let go of the torch.&#8221;</p> <p>The commemorative objects are being sold at prices starting from BRL 2,000. On online marketplace Mercado Livre, some are being valued as high as BRL 70,000.</p> <h2><strong>Potential solutions from the OECD</strong></h2> <p>Financial markets predict that this year&#8217;s inflation rate will be slightly lower. According to the Central Bank&#8217;s most recent Focus Report — a weekly survey of top-rated investment firms concerning their outlook for the Brazilian economy — the rise in prices for 2021 should hover around 3.34 percent.</p> <p>With the advent of coronavirus vaccination campaigns in Brazil and around the world, there should be less pressure on foreign exchange rates, reducing the price of foodstuffs. However, inflation adjustments in the sectors of private health and <a href="https://brazilian.report/newsletters/brazil-weekly/2021/01/04/2021-begins-with-uncertainty-over-brazil-vaccine-plan/">education</a> were put on hold in 2020, meaning they are set to return in force this year. Some experts say that premiums of private health plans could increase by up to 30 percent.</p> <p>In order for Brazil to escape the current crisis, the Organization for Economic Co-operation and Development (OECD) argues that the country must improve its spending efficiency, expand productivity, and enhance public policies related to professional training.</p> <p>In a report issued in December, the OECD pointed out that a broad reform program to improve regulation and competition, reduce foreign trade barriers, and reinforce institutions could lead to a yearly GDP increase of 0.9 percentage points in Brazil for the next 15 years.

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Renato Alves

Renato Alves is a Brazilian journalist who has worked for Correio Braziliense and Crusoé.

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