Since then, nothing has changed in the behavior of the President of the Republic and, consequently, the second wave of the pandemic has expanded dramatically. Naturally, the economy is beginning to feel the weight of the situation, starting with the acceleration of inflation, which is much stronger than what appears to be the perception of the authorities, who insist on seeing a temporary and temporary event. The recent figures worry even strong hearts and reinforce a projection of 5% growth in consumer prices.
First of all, food prices do not give a respite, in spite of the good summer harvest that we are harvesting. This is due to very high levels of international prices, which find a real quite devalued. The serious issue is that international stocks of agricultural products are very low and demand tends to remain high, in view of the highly expansionary fiscal and monetary policies. We are in a situation where any crop failure at a relevant supplier (United States, China, Brazil, Argentina, etc.) may produce even more robust increases throughout this year.
Second, the difficulty of global supply chains in responding to expanding demand is resulting in great pressure in the areas of raw materials, intermediate inputs and semiconductors, which raises industrial and then retail prices. O episode of the Suez Canal it just shed light on that situation. The wholesale price data, revealed by the IGP-M in March, frighten anyone: in 12 months, intermediate goods grew 37% and raw materials, 70%! In the civil construction index, the component of inputs, equipment and services grew by 22%, adding to the increase in food prices.
In addition, there are also concerns about increases in oil products and pressure on the price of electricity. I call attention to the level of reservoirs in southeastern Brazil at the end of March, the end of the rainy season, 35% compared to 52% last year. The red flag will be triggered persistently throughout the year.
In summary, although part of these pressures may be reversed in 2022, we are experiencing a very difficult inflationary moment, in which the impact of the dollar rate will continue to be noticeable. In this market, uncertainties from three sources are exhausted, which seem inexhaustible: the course of the pandemic, the fiscal crisis and the warming up of political conflicts, aiming at the succession of next year.
The pandemic has already turned into the biggest health and human crisis in the history of the country and, given the scarcity of vaccines (at least until May), we will continue to see a high number of cases, deaths and distressed responses from governors and mayors at least until June. As Europe shows, the exit from the pandemic will be excruciatingly slow, not least because the fiscal crisis and the inertia of the federal government do not allow the flood of money that occurred last year to be repeated after the payment of the coronavoucher.
On the contrary, demand and the labor market will remain weak, while certain supply restrictions will bring down part of production, as is happening with the widespread closure of factories in the automotive sector. The first half of this year will be a recession and we will continue to see growth in the START in the order of 2.6%.
It is already possible to foresee a certain contamination for 2022.
However, what disturbs me most is the perception that the power in Brasilia (Executive, Legislative and Judiciary) is completely distant from what happens in the country and continues to be immersed in quarrels and parochial brawls, fueling the fiscal crisis, feeding the political crisis and perplexed by the pandemic, even though it has already completed its first anniversary.
* ECONOMIST AND MEMBER OF MB ASSOCIADOS. WRITTEN FOR fortnightly
Get the latest news delivered to your inbox
Follow us on social media networks