The improvement in the Brazilian labor market is surprising. In the second quarter of 2022, the employed population grew 2% compared to the first quarter, and 11% compared to the second quarter of 2021. The expansion was 6% compared to the fourth quarter of 2019, the last quarter before the epidemic.
For comparison purposes, in the US economy, which has been characterized by a strong recovery in the labor market, the employed population is 1% above the pre-epidemic level.
The wage bill in Brazil has also grown. It increased 4.4% compared to the first quarter of 2022 and 4.8% compared to the second quarter of 2021. As the average salary is still 8% below the pre-epidemic level, the wage bill in the second quarter was still 2% below the fourth quarter of 2019.
But wages have reacted. In the first half of the year, wages rose 2% above inflation, compared to the fourth quarter of 2021. There is still a lot to improve, as wages remain well below the pre-epidemic level, as we saw in the previous paragraph.
Anyway, the growth of the salary mass should sustain an expansion of the Brazilian economy in 2022 greater than I imagined in December. Next week the IBGE will release the GDP performance in the second quarter of 2022. According to Ibre’s estimate, we grew 1% compared to the first quarter and 2.9% compared to the second quarter of 2022. The economy should close 2022 at 2%.
The unemployment rate stands at 9.1%. It is possible that the improvement in the labor market, which has surprised everyone, is already a sign of the maturation of the labor reform.
Professor at the UFRJ Institute of Economics Eduardo Costa Pinto criticized in the text “Why is it so difficult to settle accounts when they talk about investments in Petrobras refining?”, on the Brasil 247 website, last week’s column about the high costs of building refineries by Petrobras.
Eduardo argues that it is not right to allocate all of the US$ 100 billion of investment in refining, as I did. What part of this investment had other destinations: US$ 13.6 billion in transportation; $27.4 billion in quality improvement; $35 billion in modernization; and therefore only $24 billion in capacity expansion.
So, as the capacity expansion in the period was 400 thousand barrels per day, the cost was US$ 60 thousand per barrel per day of refining capacity, much lower than the number I reported in the column, but still , twice the cost of the best refineries.
According to Eduardo, costs were higher due to three factors: 1) the investment cycle of the 2000s coincided with an investment boom in the sector; 2) Petrobras learning after decades without expanding capacity; 3) the problems arising from the Lava Jato operation.
I understand the criticism and thank the professor for the kindness of the comment and corrections. However, it seems to me that one fact still holds. Between 1954 and 2002, the company invested in these areas, of which refining represents an item, US$ 27 billion at 2012 prices, and from 2003 to 2015, it invested US$ 100 billion, also at 2012 prices. In both periods there was investment to expand capacity, in transport and in modernization and quality improvement. In the first period, refining capacity grew from zero to 2 million barrels per day, and in the second, from 2 million to 2.4 million.
Unless the composition of investment in the current period has been very different from that of the previous 48 years, something has gone very wrong in the investment cycle of the 2000s.
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