Opinion – Vinicius Torres Freire: Gasoline was expensive under Lula and Bolsonaro, but before, there was more to the salary

The average price of gasoline under Lula 2 was equivalent to that of the Bolsonaro government before the epidemic and even at the end of 2020. Diesel was a bit more expensive. Cooking gas, cheaper. The war did decisive damage. These are prices corrected for consumer inflation, the IPCA.

Under Dilma 1 (who made informal pricing and had a friendly dollar) and Temer (who released general), diesel and gasoline were cheaper. The account changes little if we measure the purchasing power of the minimum wage or the average wage in terms of fuel, see graph.

This story gives food for thought about important prices, fuel and food. They depend on the dollar and the world price, always, and on policies, several with serious collateral damage, such as perverse tariffs and subsidies.

It also gives food for thought about the demagogic stupidity about Petrobras and privatizations, in part electoral rhetoric. The risk is that another part is a harbinger of ideas that left and right want to reapply in 2023, silly for 50 years.

Food prices also went up a lot without politicians having faniquito. The average inflation in the epidemic, from February 2020 to February 2022, was 16%. That of rice, 40%. From beef muscle, 50%. From soybean oil, 109%. Gas, ethanol and diesel, 47%. Gasoline, 45%.

During this period, the average nominal wage (excluding inflation) rose by only 4%. Under Lula, diesel was also expensive, but more things started to be included in wages, for domestic and international reasons (such as the relative fall in industrial prices). The biggest issue is the ruin that has been coming since 2014, but that was planted before that. Getting your hands on Petrobras is a ruinous solution to a different problem.

Brazil exports surplus meat, soy and corn. It is “self-sufficient”, as it should be in diesel, say uneconomical, naive or hack nationalists. Should it also set prices or prevent grain and meat exports? We don’t have a Boibrás or an Embramilho, but the government could do something about it. With limited price, would the producer invest in more production or productivity?

There was an extraordinary price shock in the epidemic, an upward shock from May 2020, when inflation in Brazil was 1.8% per year. It was at 4.5% per year in December 2020. At 10% in December 2021.

In large part, the rise resulted from an unusual combination of commodity prices (grain, oil, etc.) rising with the dollar also rising. The real was the currency that lost the most value from the beginning of the epidemic to December 2021: the dollar became 30.5% more expensive. The reason for the exaggerated devaluations of the Brazilian currency will still be a reason for a long quarrel among economists. Financial market institutions, high debt with growing deficit, interest rates, economic depression, Bolsonaro mismanagement, everything has its share.

Pricing limits investment and innovation (in efficiency and in alternatives such as renewable energy or green meat). Decreeing that a product must be made in Brazil (diesel or sneakers and cell phones from Asia) tends to lead to inefficiency: it is even possible to do it, but using capital and work that could be allocated to the activity that gives more return. We can, therefore, produce everything here, more expensive, and become poorer. Yes, some countries have invented efficient industries. At least since 1980, we’ve almost only done stupid things in this area, from money to big rogue companies, under Lula 2 and Dilma included.

In order not to leave the poor in even greater bitterness, we need patches, such as a minimum income. Furthermore, things are not simple.