Opinion – Vinicius Torres Freire: Rain fell, dollar falls, inflation still rises, Bolsonaro holds on

The dams of the hydroelectric plants did not have as much water in February since 2014, when horrible droughts began to occur, with the risk of rationing and expensive electricity bills. The dollar price has fallen since the beginning of the year, but it is too early to have a refreshment in prices, even though the appreciation of the real may contain fuel readjustments, in the very short term. High inflation is still a long way off, at a pace of at least 9% a year through June.

It is not a record of mere economic arithmetic. Inflation has a direct effect in the vein of politics. It is one of the reasons why Jair Bolsonaro and his cronies try to invent measures to please such and such groups, which are limited, but which may generate enough votes to guarantee a place in the second round.

As for inflation, despite the rains, the relief in electricity and the big and pleasant surprise of the recent fall in the dollar, things are still going badly.

There was no drop in the price of commodities (things like oil, grains, ores). The record grain harvest withered because of the drought in the South, with losses in soybeans and problems in corn and rice, which also makes oils and animal feed, which hits the price of meats.

It is possible that the situation will get worse, because of the war or near-war in Ukraine, which affects prices of oil, natural gas, grains and cooking oil, at least. Food inflation in Brazil also worsened because of the rains that damaged the gardens.

Industry prices remain pressured, as the market cliché says, because of the very expensive dollar until December and the persistent world shortage of inputs. Factory supply problems take a long time to pass, even because of the omni, which is little and less talked about, but which causes economic disturbances and kills many people (more than 800 people a day in Brazil, but we forget about this matter).

The IPCA-15 was 10.8% per year in February (the rate accumulated in the last 12 months of this version of the IPCA that measures the price variation from the middle of one month to the middle of the following month). Food inflation, which reached 19% a year in February 2021, rose more slowly, but accelerated again to 9.5% in February.

Bolsonaro and accomplices try to turn around. The federal government tried to bill the predicted readjustment of more than 33% for elementary school teachers. It will try to pass this withdrawal of R$ 1,000 from the FGTS, which relieves the lives of about 40 million. The renegotiation of Fies (the public funding of private college tuition) starts in March and can help 1 million students (or alumni).

It seems that the disastrous ideas of reducing fuel taxes at the cost of tens of billions have gone to the drawer, but there must be some tax reduction, for diesel and for industrialized products. Who knows if or when such tax cuts will hit prices, but it’s an attempt the demagogue can trumpet.

More than that, the tax cut may even result in some small economic stimulus, although it is not known who this money will fall into. If the FGTS money also appears, another tic of help.

It’s all very little and subject to the big bumps that will come throughout the year – there can still be an ugly war, there will still be interest rate hikes in the US, the election campaign can swing the dollar and interest rates here, depending on the nonsense we’re going to hear. in the campaign.

It’s not much, it’s worth noting. But for now, Bolsonaro plays to lose little in the first round. Going to the second, the opportunity to promote a coup riot is even alive.