The war in Ukraine should cause food inflation to accelerate again in the world and, of course, in Brazil. Wheat, corn and soybean prices jumped on Monday (28) in several markets for these commodities, in Chicago and London. More expensive corn and soybeans also increase the price of animal feed, therefore meat, and also oil.
Corn prices rose more than 5.5%; soybean, around 3.5%; of wheat, almost 10%. Russia and Ukraine export around 30% of the wheat purchased on the world market and just over 20% of the maize.
Exports from these two countries could be hampered by the ruins caused by the war, the financing difficulties caused by sanctions on the Russian financial system and the blockade of Ukrainian ports by the Russian navy.
Minister Paulo Guedes (Economy) said this Monday that he was concerned about the global inflationary pressure due to the war.
“In the case of Ukraine, the issue is grains; for Russia, it’s fertilizers, as far as Brazil is concerned. We are worried about world inflation. It’s much more the impact on the global economy, because we are starting to recover from the pandemic So it’s not good for the world,” he said in an interview with Bloomberg TV, which specializes in economic and financial information.
Russia is the world’s largest exporter of fertilizers. The US sanctions against Russian banks for the time being exclude business with agricultural products, as well as allowing transactions related to the production and trade of energy, among others. However, it is also possible that payment difficulties and trade financing for these products cause shortages, delays and price increases.
“The world is in synchronized deceleration. Inflation is growing all over the world, and this could worsen the future of the global economy”, continued the minister.
According to Guedes, Brazilian inflation is mainly the result of global inflation, and he used the United States as a comparison. “There is no inflationary pressure. Inflation in Brazil went from 3% to 10%. Inflation in the United States was from 0% to 7%. So basically it’s global inflation,” he said.
The preview of official inflation in Brazil had a variation of 0.58% in January and remains in double digits in the 12-month period, with 10.20%, according to data from the IPCA-15 (National Index of Consumer Prices Extended 15). In the United States, inflation reached 7.5%, the highest in 40 years.
Food inflation in the country reached 19.1% per year in February 2021 (from “food at home”, according to the IPCA-15). In January, it was still growing at a fast pace, but had slowed to 8.5% per year. In February, it accelerated again, to 9.5%.
In one year, corn prices on the world market increased by more than 25%; soybean, 17%; of wheat, 42%. However, in just two months of this 2022, the price of corn rose almost 18%. Soybean more than 22%; that of wheat more than 18%. The war had a greater influence on this surge.
A barrel of oil (Brent type) was quoted yesterday at US$ 101.1, up 3% on the day. This year, the accumulated high is almost 30%.
Guedes’ team fears that the advance in international oil prices will intensify the search by President Jair Bolsonaro (PL) and Congress for populist and, in practice, ineffective initiatives to try to hold down fuel prices.
Today, the measures are focused on the exemption of federal taxes on diesel and the change of ICMS (Tax on Circulation of Goods and Services). The possibility of a spike in inflation at the height of the election campaign had driven Bolsonaro’s decision to sponsor the PEC to cut taxes on fuel.
The prices of these commodities in Brazil reflect world market conditions — whether grains or oil sold by Petrobras and quoted by the state-owned company’s declared policy at “international parity” values. An appreciation of the real against the dollar could contain the soaring shortage of basic grains, meats and fuels. But the modest advance of the Brazilian currency this year lags far behind commodity inflation.
Paulo Guedes also denied that there is fiscal pressure, said that the Brazilian primary deficit fell from 10% of GDP (Gross Domestic Product) in 2020 to 0.4% of GDP in 2021 and also said that social spending is within the ceiling.
The economic team expects a drop in inflation, according to the minister, who says he believes that Brazil can again “surprise for the positive”. “I’m more worried about you guys,” he commented.
“The Fed [Federal Reserve] is well behind the curve, the ECB [Banco Central Europeu] also. I’m very worried about you here, the Fed is sleeping at the wheel and global inflation is coming,” he said. In Guedes’ opinion, both are late in fighting inflation.
The economics head commented on the increase in grain prices on a trip to New York, in the United States. He took advantage of the Carnival holiday to make contacts with investment banks and institutional investors in New York, in the United States.
When asked about President Jair Bolsonaro’s “neutral” position on the war, the minister highlighted the country’s official position.
“Brazil, in the UN Security Council [Organização das Nações Unidas], voted twice —and we will vote again—​ condemning the invasion of Ukraine. In saying this, we wish that the situation is resolved peacefully as soon as possible,” he declared.
On Sunday (27), President Bolsonaro defended that Brazil remain neutral in the conflict. “We cannot interfere. We want peace, but we cannot bring consequences here,” said the Brazilian president during a press conference at a hotel in Guarujá (SP).
In a speech at the UN General Assembly, this Monday (28), Brazil condemned the invasion of Ukraine by Russia. Ambassador Ronaldo Costa Filho asked the United Nations bodies to work together in search of solutions. “We are under a rapid escalation of tensions that could put all of humanity at risk. But we still have time to stop this.”
In the afternoon, Brazil again criticized the risk of escalating tensions at a Security Council meeting.​ “Severe sanctions can have effects on the global economy with consequences felt far beyond Russia. Possibly, populations in developing countries will suffer the most,” said João Genésio de Almeida Filho, the country’s alternate permanent representative to the UN
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