Opinion – Vinicius Torres Freire: Increases the risk of still high inflation in 2022

Brazil’s grain harvest would be a record. The price of oil would go up just a little bit more. With luck, the hydroelectric reservoirs would fill at least to the point of avoiding rationing or extra increases in the electricity bill.

A week ago, it was written in these columns that the inflation cat was starting to peek at the roof. Now, a mere seven days later, the beast has begun to climb the ladder.

It was known that the grain harvest would not be a record. The news got worse. The price of corn goes up. The soybean crop is going worse than expected. It is dry in one place, excessive rain in another. Animal feed and oils are therefore more expensive; lack pasture. Beans are going to be expensive.

The price of the arroba of the ox is at the historical heights that it reached last year (in the average of the last month, 21% more expensive than at the beginning of 2021). According to Cepea researchers, the return of sales to China supports meat prices. Cepea is the Center for Advanced Studies in Applied Economics at the USP School of Agriculture.

Wholesale inflation rises again in January, fueled especially by iron ore and soybeans. There is also the risk of interruptions in factories and ports in China, because of the omni, delaying the return to normal supply of parts and supplies for the industry. As if that weren’t enough, there’s oil.

The price of a barrel (Brent type) exceeded US$ 88 this Tuesday (18). There had been a refreshment late last year when Brent scraped past $70. Since the start of the year, it has risen more than 12% and passed its high in 2021.

The underlying problem is the restriction of supply, accompanied by the recovery of the world economy, which continues (but no longer in Brazil).

OPEC, with support from Russia and other friends, is increasing production in a measured way; some countries are not even able to produce the cartel’s “share”. Perhaps the rumor of confusion in Ukraine will help raise the price of a barrel.

Whatever the reason, the underlying problem is cartel, it’s politics. Can anyone imagine Vladimir Putin being moved by Joe Biden’s complaints about world inflation?

Yes, the rain also took more water to the hydroelectric reservoirs in the center-south. At this time of year, they haven’t been this full since 2016. It’s not a big deal, but the chance of a disastrous crisis, rationing, has passed and well. However, the cost of light is skyrocketing, and there will still be increases for years to come, as the bill for last year’s shortages, among other problems, is dammed.

The year is at the beginning, and part of these losses can be compensated, in theory. But the hypothesis of a faster drop in the inflation rate (which would still be around 5% at the end of this 2022) is going fast for the vinegar. Terrible interest rate hikes and economic stagnation will hold up prices. Obviously, it’s not a consolation.

Small talk and lies about fuel prices returned to the political news, even during class vacations. Jair Bolsonaro lies even more: he again said that the high price is caused by the ICMS and, even more brazen and ignorant, because of the robbery at Petrobras.

Gasoline and diesel are expensive because Petrobras charges world market prices, translated into the dollar price in Brazil. Point. On average in December, the dollar closed at a level close to the peaks of 2021 and 2020. Before that, such a devalued real only turns around in the aftermath of the crisis of Lula 1’s election, in 2003.

Will the dollar get significantly cheaper? Unlikely, because Bolsonaro is in power, shaming the government and an election that would already be tumultuous, with capital parked outside the country, waiting for the animal to come out of the polls.