Brazil suffers from the third-largest inflation rate amongst the most significant economies worldwide, behind Argentina and Turkey, according to OCDE (Organization for Economic Co-operation and Development). This inflation is felt everywhere, with constant rises in gas prices, food, and unemployment rates. This March, inflation was at 8.8%, the highest it's been since October 1988. And just in the past five years, the purchasing power of the real has lowered by 30%. Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs and tax policies.
Many things affect this extremely high inflation, the biggest being the value of our currency which is directly connected to the dollar leading to our currency that constantly varies its value. Generally, inflation can be caused by monetary factors, such as the government printing money, adjustments to prices due to business competition, or a mismatch between the supply and the demand for goods and services. Brazil's case is a mixture of many of these factors (dollar, fossil fuels, water crisis, and agriculture which heavily impacts Brazil's economy) and the current events in the world.
The conflict in Ukraine and other major worldwide events such as the Covid-19 pandemic have created ripples that are affecting Brazil’s economy. The price of oil being a major example of this, with petrobras increasing the price of diesel by 8,8% (4,91$ reais per liter), due to reduced offer in comparison to the high demand.
Although Brazil's economy has been able to rebound and reach similar numbers to a pre-pandemic economy, its inflation has not been able to recover. Disruptions in the world's supply chain and higher commodity prices are helping to fuel inflation that will translate into even higher borrowing costs, leading to less investments and less economic growth, keeping Brazil's inflation at a high percentage.
Comments