Inflation spreads and already punishes families of all stripes

Rich or poor, Brazilians are now surrounded by inflation on all sides. The rise in the price of basic foodstuffs, which had been punishing low-income families since last year, continues to show its face throughout 2021. The price of meat, for example, goes from R$ 40 per kilo and rose by the equivalent to three and a half times the general inflation, which accumulates high of 9.30% in 12 months until August, according to the Extended Consumer Price Index (IPCA)-15). Soy oil, the main villain in the cost of living, is already close to R$ 8 a bottle, and increased more than eight times the general inflation of the period.

Brazilian consumer faces a big rise in prices

Brazilian consumer faces a big rise in prices

Photo: Pilar Olivares / Reuters

The difference from this year’s inflation is that it received a highly explosive component that made the price rise spread throughout the entire economy. Products that are considered to be reference prices, that is, they enter into the formation of other prices, such as diesel, electricity, for example, which triggered and contaminated the others.

From this group, the most visible price for the Brazilian with higher income appears at the gas pump, with the liter sold for up to R$7. For the poorest, the reference price is cooking gas, the value of which in the canister is now close to R$ 100 and accumulates an increase of more than 30% in 12 months.

“This year’s inflation is more ‘democratic’: it affects rich and poor,” summarizes the coordinator of price indexes at Fundação Getulio Vargas (FGV), André Braz. He explains that while famine only hit food, the poorest were the most affected, because they consume more of these items. Meanwhile, wealthier families did not feel, to the same degree, that inflation had soared.

Barred from spending on services, driving and traveling by plane because of the pandemic, the higher-income social strata saw many prices of products and services that they consumed parked or even falling last year because of social isolation. With that, the rich managed to save.

But what you see this year is that price pressure has spread. The devaluation of the exchange rate, which changed the prices of oil and fuels in reais, and the water crisis, which affected energy generation and tariffs and reduced agricultural production, caused inflation to take another direction.

“Now inflation is perceived by everyone,” says Braz. The rise in the price of rice, a staple dish that weighs in the pocket of the common Brazilian, was 36.89% in 12 months until August. This increase is practically equal to the increase in gasoline prices in the same period, of 39.52%, and is consumed by the richest.

This spread appears in the percentage of items that are increasing in price in the IPCA-15. In August, this slice is 73.30% and is second only to January of this year, which was 73.84%. “A result above 60% would already be problematic”, emphasizes the economist at LCA Consultores, Fábio Romão. A result in the range of 70% reveals, in his assessment, that inflation is reaching all social classes.

According to the economist, there is a more complex range of inflationary pressures at work and also on the way. They are in services and industrial goods. He recalls, for example, that with the reopening of activities suspended due to the lockdown, there is a risk of inflation in services soaring, since higher-income families will be predisposed to spend the savings accumulated in the closing period. Industrial goods, which had disorganized production chains, have not yet returned to normal. This means a lack of parts, for example, in the zero car, and more inflation for the consumer.

Even products that were considered symbols of the Real Plan, responsible for the stabilization of the Brazilian economy from July 1994, after a long period of hyperinflation, entered the common trench of high prices.

Twenty seven years ago, a kilo of whole chicken cost R$1. Today it costs nearly R$10 and has already risen 22.89% in the last 12 months until mid-August. Yogurt, another icon, in the past, of economic stability and affordable food for the poorest due to the drop in inflation, is now at the opposite pole. The price of the product rose 14.09% in the last 12 months to this month, well above general inflation in the period.

On a tight budget, families delay electricity and water bills

Rising prices have put pressure on household accounts and required efforts to prevent debts from piling up. An example is that of Erika Lima, 39, lives in Paranavaí, Paraná, who works with social media in an advertising agency.

She and her husband have a small Japanese food delivery service, set up in their own kitchen at home for 5 years, which helps to supplement their salary, which is little more than the minimum. But rising day-to-day costs, especially food, have squeezed the budget.

As a result, she had to delay the payment of energy, water and internet bills to be able to keep her rent payment up to date, which has higher interest rates, and also the eldest daughter’s online college, so as not to lose the discount on the tuition fee that the institution offers.

“The money I earn at the agency, I use to pay the rent. The delivery money pays all the other bills,” he says. “I only pay for water and electricity when they are about to be cut off, unfortunately. The credit card has already turned into a snowball. Every month I pay less than the total bill.”

With a tight budget, she also had to interrupt therapy sessions and appointments with a nutritionist, which began in December, to try to resolve her anxiety disorder and depression. “The therapy had been doing me very well, but the escalation of the increase in expenses forced me to stop. The accounts stopped closing from May until now and I had nothing to cut back,” he says.

Family income fell because, in addition to their payment being reduced by R$300 due to the loss of an agency client, the average value of orders at their restaurant fell, not to mention that the products became more expensive. Salmon, for example, jumped from R$30 to R$72 since the beginning of the year, according to her. “The only thing that didn’t go up was the rate we pay the delivery man, but he’s also like us, he has three jobs,” he said. With the crisis, she also dismissed the kitchen assistant, and the middle daughter started working with the couple.