Six economists say what can be done against inflation


A inflation, which reached 10.25% in the 12-month period up to September, is one of the main challenges facing the Brazilian economy. Widespread, high prices make the population poorer. But the assessment that the government has made is that this is an almost inevitable situation. In his most recent weekly live, last Thursday, the president Jair Bolsonaro he said that inflation is a global problem and called on those who criticize him to present solutions.

The request was accompanied by an attempt to relativize the famine facing the country. Armed with an extensive list – from basic foods to toilet paper -, it showed that Americans pay more for potatoes, soy oil and meat, for example, than Brazilians. “Are you complaining that it’s high here? There it is too. This crisis is all over the world. It’s not just in Brazil,” he said, while blaming the “stay at home” policy adopted by governors and mayors for the soaring inflation to contain the pandemic.

The day before yesterday, in an interview with CNN in the United States, the Minister of Economy, Paulo Guedes, also stated that the problem of inflation is global, and that in Brazil half of the rise in prices is concentrated in energy and food.

Indeed, there is a global increase in inflation, but the situation is much worse in Brazil. While the price rise in 12 months here is in double digits, the average in the 38 countries of the Organization for Economic Cooperation and Development (OECD) is 4.3%.

Estadão heard six economists to respond to Bolsonaro’s request. For them, the government had a fundamental role in the lack of control over prices and may also play a role in the return to normality – mainly by treating public accounts with responsibility. Next, read economists’ recipes for tackling inflation.

Alessandra Ribeiro, economist and partner at Tendências Consultoria

The surprise has been negative when talking about inflation in the main economies of the world and especially in Brazil. There are elements that are common to the countries, but there are domestic factors that increase inflation, generating important costs for Brazilian society, especially in the lower income segments. Much could have been done to avoid this picture.

Part of this inflation stems from the pandemic and its effects. In Brazil, there are specific elements that increase inflation: climate issues (drought and frost) and high risk perception in view of the fiscal and political/institutional scenario. The distrust in relation to the sustainability of public accounts and the maintenance of the rules of the game from the institutional point of view increase the risk perception of economic agents and consequently affect the pricing of financial assets, such as the exchange rate. Through the exchange channel, the increase in prices is magnified in the domestic market.

The real has remained detached from its main fundamentals. The explanation is that there is a risk component that markets embed in pricing that is not being captured by the models. In other words, with signs and measures of responsibility in conducting public accounts and respecting the rules of the institutional game, a good part of inflation could have been avoided.

Luciano Sobral, chief economist at Neo Investimentos

The best action to fight inflation today within the president’s reach would be to reinforce the commitment to the constitutional spending ceiling, after the necessary modification to accommodate the precatory payments next year. This would imply limiting the increase of social programs to the open space under the roof in accordance with the current content of the PEC in progress in the Chamber of Deputies.

Returning predictability to government accounts until the elections would likely cause the real to appreciate significantly, automatically lowering the price of products that are quoted in dollars (fuels, much of food and other industrialized goods) and alleviating inflation. The current dollar price of a barrel of oil (about US$83) is at the same level as in September 2018; Today we only have the most expensive gasoline in history because the exchange rate, which was R$ 4.05 per dollar at the time, is now R$ 5.50, largely due to the political and fiscal turmoil caused by the government itself. .