January 8, 2022

15:01

Nauzila Campos – Cenarium Magazine

MANAUS – The Broad Consumer Price Index (IPCA) is the base that makes prices in general more expensive in Brazil. Main indicator of inflation, the IPCA has exceeded 10% in the accumulated over the past 12 months – and this has not happened since 2015. Products are more expensive than ever before.

The world is already experiencing a process of economic recovery after the impacts of the pandemic, with fundamental help from vaccination. But the emergence of new variants, much related to the denialism present in several countries (which compromises the control of the virus by vaccination and the withdrawal of the pandemic title by the World Health Organization, WHO), has slowed down this follow-up.

In Brazil, due to its peculiar economic policy applied since 2019 with the Bolsonaro government and directed by the Minister of Economy, Paulo Guedes, these consequences are even greater. An economic recovery is considered even more distant by economists. “Brazil is still a long way from that. (…) With inflation closing 2021 above 10% by IPCA (forecast of 10.42% – Agência Brasil), the trend is to remain high still in 2022, due to the lack of economic growth perspectives. In a normal economic cycle, the means of production produce, generating employment and income. With income, the worker consumes and stimulates production, and the cycle is renewed. This is not what is happening in Brazil”, states economist Denise Kassama.

‘Staginflation’

Not all the blame can be attributed to Paulo Guedes’ management. Water crisis with scarce rainfall, crop failures and inter-harvests, increase in the dollar and, of course, the pandemic, are part of the economic out of control. However, the economic policy fails by neglecting to combat the real Brazilian scenario. This is what Kaassama explains. “As there are no factors that change this situation, a low economic activity tends to lead the country to a ‘STAGINFLATION’ (inflation with economic stagnation). It is worth pointing out that Brazilian inflation is not an inflation of demand (when prices increase due to the increase in demand for goods and services). In this case, the increase in the Selic rate with the purpose of discouraging consumption would be an adequate mechanism.

The problem is that increasing the Selic (the basic interest tax) in a country where inflation reaches mammoth levels, is more harmful than solvent for the majority. “Brazilian inflation is related to supply problems and is also hitting the whole world in different ways, because the pandemic caused the misalignment of production chains worldwide. However, in this case, and considering an economic scenario of low growth, the increase in the Selic tax is cruelly penalizing the majority of Brazilians and, in particular, those who had their incomes harmed by the pandemic, generating inhumane scenes of Brazilians lining up to buy ox bones or scavenging through garbage dumps looking for leftovers of food”, reminds the economist of sad scenes of misery watched in 2021.

When adding up the unemployed and underemployed, there are 30 million Brazilians. Not to mention the fact that slave labor suffers from underreporting since the extinction of the Ministry of Labor and Employment during the Bolsonaro administration. Inspections have been significantly reduced and the lack of data hampers the creation of public policies in this type of confrontation.

In the Northern States, the economic incentive is even more hindered by logistical problems and the still current productive dependence on the South and Southeast. The solution could come from the federal government’s engagement with the productive sector, from micro to large industries. “However, this government prefers, for example, to reduce Import Tax rates to facilitate the entry of foreign products instead of stimulating the national industry”, concludes Denise.