Opinion – Vinicius Torres Freire: Brazil wins silver medal at the world championship of expensive energy

Energy inflation in Brazil is one of the highest in the world. It can be said that it is the second highest among the largest or richest economies, those that together make up 97% of the world’s GDP. Second only to rich, quiet and large energy producer Norway.

On average across OECD countries, the price of energy increased by 15.8% in one year to September. Brazil does not have an immediately comparable statistic, but prices for domestic fuels (such as gas) rose 33%, electricity 28.8% and vehicle fuels 43.7%. It’s a silver medal.

The OECD is a club of rich countries that have accepted to follow certain economic rules or that have a warm back — Brazil wants to join, but it still doesn’t have clothes. Among the 38 members of the club are the rich economies of Europe, North America, Asia and Oceania, plus Mexico, Chile, Colombia and Costa Rica. The OECD (Organization for Economic Cooperation and Development) also regularly publishes comparable statistics from China, India, Russia, Brazil and South Africa, for example.

In the OECD, the highest energy inflation is that of Norway (up 78%), with Spain in second place (26.8%). In the United States and its free or very flexible market, energy was on average 22% more expensive.

Inflation in general in Brazil is also on the podium of famine of these most relevant economies. In 12 months, it is second only to Argentina (51.4%), bidu, and Turkey (19.3%).

Based on data from 46 countries also compiled by the OECD, inflation in Brazil was not the one that increased the most (accelerated) from the beginning of the epidemic until now — it is in 14th place, in this regard. But that simple stat doesn’t make a lot of sense without a little context.

Argentine inflation did not accelerate, but continued at around 50%, much worse. In other countries where there has been a notable acceleration, the increase in prices for consumers has gone from something around 1% a year to 4% a year, an acceleration much greater than that of Brazil, where, however, inflation is more high and, at the moment, is on the verge of getting out of hand. It’s easy to see that these are different worlds.

There is a worldwide energy shock, of varied causes. As for Brazil, the rise in the price of oil was even multiplied by the great devaluation of the real, the expensive dollar. The already expensive electricity bill has increased even more because of the drought.

From February 2020, just before the epidemic, until this month of November, the real underwent the biggest devaluation (against the dollar) among 38 currencies normally monitored by the IMF. In Brazil, the dollar was 27.5% more expensive during this period (average in February 2020 against average in November 2021). In second place comes the Peruvian sun (18.4%).

Among the currencies of relevant so-called “emerging” countries, the real varies a lot, makes relatively larger leaps, because of the (some bad) characteristics of their large money markets, in particular the exchange rate. The fact that we are often on an economical salt shaker is very important, if not decisive.

Government debt in Brazil was at a very high level right before the epidemic. With the humanitarian and economic disgrace that would be caused by the coronavirus, it was evident that the debt would rise further. Even given that the country is experiencing the worst economic debacle in 120 years of history on record, the expectation of an uncontrolled increase in debt has grown even stronger. It is an ingredient of the exchange rate devaluation, which was seasoned with the rotten peppers of the economic mismanagement and permanent political upheaval, works by Jair Bolsonaro.

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