Economy Minister Paulo Guedes minimized the risks of the energy crisis on Wednesday and stated that it is just a “cloud on the horizon” for the recovery of the Brazilian economy. “What’s the problem now: that energy will be a little more expensive because it rained less?” , said the minister, at an event at the Chamber of Deputies.
For specialists, the problem is, yes, serious. The electricity bill weighs heavily on the household budget. After gasoline, residential electricity is the individual item that most influences inflation by the IPCA, an index that is the main reference in the country. Energy has a weight of 4.50% and gasoline, 5.95%.
In the last 12 months, the electricity bill has risen on average 20% in Brazil.
Furthermore, energy has a ripple effect on prices in the economy. It affects the costs of industry and commerce, putting pressure on inflation as a whole. It has a strong influence on the services sector, such as restaurants, beauty salons and gyms. The services sector was one of the most affected by the coronavirus pandemic and is beginning to gain momentum with the reopening of the economy.
The higher cost of energy could reduce the country’s economic growth in 2022, according to experts. Earlier this week, Itaú’s chief economist, Mario Mesquita, warned that the risk of restricted energy supply is already outweighing the spread of the Delta variant of the coronavirus in the recovery of the Brazilian economy.
A recent survey by the National Confederation of Industry (CNI) found that nine out of 10 entrepreneurs are concerned about the water crisis.
In the survey, carried out with 572 companies, 98% said that there will be an increase in energy prices, 63% expressed concern about the risk of rationing and 61% about the possibility of instability or interruptions in energy supply.
In his statement at the online event on Wednesday, Guedes said he was confident in the economic recovery and that the country “will go through” this crisis.
“I’m very confident that we’re going to get through. If last year, which was chaos, we organized and got through, why are we going to be afraid now? I mean, what’s the problem now: that energy will get a little more expensive Why did it rain less? Or the problem is that it is having an exacerbation because the elections were brought forward? All right, let’s cover our ears and let’s cross,” he declared during the launch event of the Parliamentary Entrepreneurship Front, in the Chamber of Deputies.
In addition to the impact on the economy in 2022, analysts believe that the effects of the crisis will also spread to next year’s inflation. TR Soluções, a technology company specializing in energy tariffs, forecasts that Brazilian residential rates will rise by an average of 9.7% this year. For 2022, the expectation is an average increase of 8.6%.
“The effects of higher tariffs should be felt next year with the tariff readjustment processes”, assesses Gustavo Carvalho, manager of prices and Market Studies at the Thymus consultancy.