Inflation, rapporteur amendments and Brazil Aid: 10 economic terms that marked 2022

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In the 2022 retrospective, the economy was highlighted in the Brazilian news, whether in relation to the government or in relation to the citizen’s pocket. THE Sheet separated ten key terms that marked the year for you to understand, remember and prepare for 2023.

Inflation

Inflation is the name given to the increase in prices of products and services. In Brazil, it is indicated by the IPCA (Extended Consumer Price Index), which shows the variation in consumer prices from month to month and is used by the federal government as a reference for inflation targets and for changes in interest rates.

The IPCA is produced by the IBGE (Brazilian Institute of Geography and Statistics). In November, the index increased by 0.41%, driven by the price of fuel and food and beverages. However, it showed deceleration compared to October, when it had risen to 0.59%. In the accumulated 12 months, up to the month, the high went to 5.90%, the lowest rate since February 2021 (5.20%).

For 2023, a challenging scenario awaits the Lula government. According to the December 26 Focus bulletin, released by the BC (Central Bank), analysts project inflation at 5.23% —above the target ceiling of 4.75%.

Contributing to this difficult scenario are projections of lower GDP growth (Gross Domestic Product), high interest rates, loss of pace in the world economy, the end of the reopening stimulus after the pandemic restrictions and family indebtedness.

food prices

One aspect that weighed heavily on Brazilians’ pockets and was highlighted in the news was the price of food and beverages. Inflation in this group, from January to September of this year, was the highest in 28 years (9.54%), since the start of the Real Plan, points out the IPCA. Since the beginning of the pandemic, from February 2020 to November 2022, the group has accumulated an increase of 36.06%.

The food was harmed by a series of factors that weighed heavily on the consumer’s pocket. In January, the drought in the South region and excessive rain in parts of the Southeast and Midwest reduced the supply of vegetables.

Cost pressure has also affected producers. Inputs used in the field became more expensive in the pandemic and increased spending to produce food. Another important aspect was the War in Ukraine, which started in February, which generated a rise in the price of agricultural commodities.

For 2023, the expectation of economists is that food and beverage inflation tends to rise less, but it should still be quite uncomfortable for citizens’ pockets. Expensive food also poses a challenge to the fight against hunger in the country. According to Datafolha, 24% of Brazilians say they have insufficient food at home.

gas price

The final price of gasoline in Brazil, from the moment it leaves the refineries until it reaches the consumer, is defined by five aspects:

  • Petrobras realization;
  • Distribution and resale;
  • Cost of ethanol/anhydrous and cost of biodiesel;
  • ICMS (Tax on Circulation of Goods and Services);
  • CIDE (Contribution for Intervention in the Economic Domain), Pis/Pasep, Confins (Contribution for the Financing of Social Security).

In 2022, amid the electoral race, President Jair Bolsonaro (PL) sanctioned in June the law that sets a ceiling for ICMS rates on fuel, energy, transport and telecommunications.

The measure actually reduced the price of gasoline and diesel, but, in addition to ending on December 31, it caused a hole in the coffers of federal entities. In December, the STF ratified an agreement that seeks to end the impasse between states, the Federal District and the Union regarding ICMS on fuel.

And what to expect for 2023? The future finance minister, Fernando Haddad, wants to define the direction of the fuel price policy together with the new board of directors of Petrobras. One of the points to be seen is the PPI (International Parity Policy), which has been practiced since the Temer government and guarantees alignment of values ​​with the international market.

PEC of Benefits

The PEC (Proposal for a Constitutional Amendment) of Benefits, also known as PEC do Auxílio Brasil and, previously, “PEC Kamikaze”, was also another electoral measure by Bolsonaro to boost social benefits and try to win the electoral race.

Approved by the Chamber of Deputies in July, the measure increased the value of the Auxílio Brasil to R$600 until the end of the year, created a voucher of up to R$1,000 for truck drivers and taxi drivers, and doubled the value of the Auxílio Gás.

With Bolsonaro’s defeat by Lula, another amendment proposal entered the scene for 2023, the Gastança PEC. Enacted by Congress in dehydrated form in December, the proposal expands the spending ceiling for fulfilling the promises of the president-elect, among them, paying R$ 600 of Bolsa Família plus R$ 150 for each family with children up to six years old.

Bolsa Família/Auxílio Brasil

In 2021, the Bolsonaro government changed the rules and name of Bolsa Família, a social program created in 2003 by the PT, to Auxílio Brasil. But with his return to power, the program is expected to resume its original brand.

The queue started the year 2022 at zero. Without enough budget in the program, however, the queue grew month after month and, in July, it reached the mark of 1.569 million families. With Bolsonaro’s effort to expand the budget in the second half, in addition to the queue being zeroed in August, September and October, the number of families was expanded.

However, after the elections, the income transfer program already had 128 thousand families on the waiting list, which the Lula government will have the challenge of supporting in 2023.

For next year also comes the account of the payroll loan from Auxílio Brasil. Sanctioned by Bolsonaro in August to be another asset in the election campaign, the payroll is a direct discount from the base benefit until it is paid. In October, loans totaled R$ 5 billion, according to the Central Bank.

Rapporteur amendments

Considered unconstitutional by the STF (Federal Supreme Court), the rapporteur’s amendments were an asset of the mayor, Arthur Lira (PP-AL).

They allow parliamentarians to apply for Union funding without details such as identification or even allocation of resources. Created in 2019, in the bill number 51 of the National Congress, the instrument helps the president to negotiate with the benches of the National Congress in search of political support.

The STF judgment took place in December, in which the highest instance of the Judiciary overturned the mechanism by 6 votes to 5.

Recession

A recession is a situation of declining economic activity, characterized, among other things, by a drop in production, an increase in unemployment and a decrease in profits.

The criteria for defining recessive periods vary. A common parameter says that two consecutive quarters of GDP retraction configure a technical recession. There are economists, however, who prefer methodologies that consider indicators other than GDP.

Among the aspects that concern Brazil and the world are the impacts of Covid, the War in Ukraine and the slowdown of economies such as China and the USA

Selic

Selic is the economy’s basic interest rate and is a mechanism used to control inflation. The rate is revised every 45 days by the Copom (Monetary Policy Committee), an arm of the Central Bank, which opted to keep it at 13.75% per year and that is how it will end 2022.

Ordinary people feel the immediate effect of the Selic hike when accessing credit and loans. In situations where the rise is high, borrowing money becomes more expensive because the interest that banks pay on transactions with each other becomes more expensive — and financial institutions pass this increase on to the common consumer.

The idea is that with higher interest rates, people are discouraged from consuming, but there is an incentive for consumers to save money, since savings start to yield more and the purchase of federal public bonds also becomes more advantageous. THE Sheet prepared a guide on how much R$ 1,000 in savings, CDB and Treasury yield with the current Selic.

For 2023, the market projects the rate at 12%, with the expectation that the Central Bank will have less room to reduce monetary tightening.

Dollar

This year, the dollar became more expensive than the euro for the first time in 20 years. In July, the two currencies had already reached parity, but it was on August 22, 2022 that European money was quoted for less than US$ 1 (R$ 5.27). Among the factors, the War in Ukraine, which increased the price of gas and other products on the continent, generating uncertainty and inflation.

In December, the Federal Revenue updated the control rules for the entry and exit of currency in cash from the country, increasing the limit for the entry and exit of cash in cash, without declaration, from R$ 10,000 to US$ 10,000 ( around BRL 52,700) or the equivalent in another currency.

For 2023, it is expected that, with the new foreign exchange law, enacted in December 2021, the entry of fintechs in the sector will lead to increased competition in the sector and positively impact the consumer.

5G

In July of this year, 5G arrived in the country, debuting first in the city of Brasília. In short, the technology is a new data band that can be up to ten times faster than 4G and that promises to revolutionize the internet consumption model, even having effects on pay TV.

Despite the modernity offered, the premiere in Brazil was troubled, with oscillating speed, partial coverage and “impurities”. Even on the eve of implementation, according to Anatel (National Telecommunications Agency), 89 municipalities still did not have 4G coverage, which arrived in Brazil in 2012.

For 2023, telephone operators advocate that the BNDES (National Bank for Economic and Social Development) create special lines to finance companies interested in modernizing their production system with 5G telephone technology.

The command of the European Union determined that operators will be able to offer the technology to passengers while they are in the air, but voice calls will be prohibited. The decision requires countries to implement the change by June 30, 2023.

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