Ethanol import tax goes to zero, paper inflation and what matters in the market

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Government tries to stop the rise in food and fuel

To try to contain inflation, the government zeroed the import tax on ethanol, coffee, margarine, cheese, macaroni, sugar and soy oil.

What explains: while for fuel, the measure aims to alleviate the rise in the price of gasoline (which has ethanol in its composition), for foodstuffs it affects products that have risen a lot in the last 12 months.

The government’s idea is that the initiative will increase the supply of these items in the country, helping to reduce pressure on prices.

What went down the most: the government also increased the reduction in the Import Tax on IT and capital goods (machinery and equipment) to 20%.

In numbers: These measures will cost approx. BRL 1 billion to the coffers of the Union. They are in addition to other measures of tax cuts made by the government and Congress this year that already add up to BRL 55.2 billion.

More about inflation

The market rose for the tenth time in a row the IPCA high projection for the end of this year, and now sees the index in 6.59%, shows the BC Focus survey. For 2023, the estimate also rose, to 3.75%.

In the first survey after last week’s interest rate hike, analysts raised their forecast for the Selic, with the rate at 13% per year at the end of 2022 and 9.0% in 2023.

Brazilian is forced to avoid the car

To avoid taking the car out of the garage and spending on fuel, Brazilians already make changes in their routine, avoid long leisure trips and opt for public transport, bicycle or even skateboarding.

In numbers: despite the latest mega-increase by Petrobras having drawn more attention, the price of gasoline had already risen sharply last year, when it shot up 47.49% for consumers and pushed the IPCA up in the period.

Cascade effect? In addition to the impact on drivers, economists warn that the mega-increase should also affect freight and make practically everything that moves along the country’s roads more expensive.

There is also pressure to increase public transport tickets, which would put additional pressure on inflation.

More about high fuel:

After a request from the US for Brazil to increase its production in order to increase the supply of oil in the world, the ANP (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis) stated that the country cannot put the measure into practice immediately.

Dollar below BRL 5

The dollar rate dropped 1.45% this Monday, to BRL 4.94. The American currency closed below R$5 for the first time since the end of June last year.

What explains: the fall in the currency this year is related to the flood of foreign resources on the Brazilian stock exchange. Investors are aware of two sectors with strong participation in the Ibovespa index:

• commodities: are on the rise since the Russian invasion of Ukraine. This Monday, the barrel of Brent oil rose 7.95%, at US$ 116.51 (R$ 578.58). The possibility of EU sanctions on Russian oil and the attack on Saudi facilities has put pressure on prices.
• banks: Institutions tend to record higher margins in their profits at times of rising interest rates in Brazil. Currency tightening also keeps Brazilian fixed income attractive to foreigners.

In numbers: the gringos entered with BRL 73.5 billion in the Brazilian stock market this year, according to data from B3. This value represents 72% of the balance of foreign resources on the stock exchange registered throughout 2021.

The day at the Exchanges: companies linked to commodities and banks recorded the biggest increases of the day. Petrobras and Vale, the most traded securities, rose 3.76% and 2.83%, respectively.

In the US, the indexes reversed direction and closed in the negative after Jerome Powell, chairman of the Fed, signaled that a 0.5 percentage point hike in interest rates in one or more meetings may be necessary to face inflation. Market estimates were for an advance of 0.25 pp at each meeting until the end of the year.

Paper boom threatens books and comics

The price of paper soared earlier this year and the result has already reached consumers, with more expensive books and magazines and a smaller variety of publications.

What explains: the pandemic, in addition to making freight and supplies more expensive, also generated strong demand for pulp and other types of paper, such as those intended for deliveries – a reflection of the e-commerce boom in the period.

As pulp is a commodity and a good part of the raw material is imported, the dollar quotation also puts pressure on the costs of Brazilian publishers.

In numbers: in the national production destined to editorial lines, inflation reached 65% only in the last two months, and the high costs should make the printing and publishing market shrink even further.

It’s not just on paper: raw material inflation also hits other sectors. A survey carried out by FGV Ibre in January showed that 47% of the companies consulted pointed to the rise in the price of inputs as the main problem faced by them.