Sons of the Real Plan deal with inflation for the first time

Stephanie Lopes, 27, has reduced shopping trips and weekend delivery orders. Fernanda Lima, 25, started picking up flyers in supermarkets to watch prices. Iago Madureira, 24, sees the dream of living alone increasingly distant.

In common, all of them were born after the Real Plan, of July 1994, which controlled the hyperinflation that punished the Brazilian economy — in June, on the eve of the implementation of the real, prices accumulated a high of 4,922% in 12 months.

Now, this young generation has to deal with the problem of a sharp rise in prices for the first time.

In the 12-month period up to April this year, the IPCA (Broad Consumer Price Index) increased by 12.13%, according to the IBGE (Brazilian Institute of Geography and Statistics).

It is the highest inflation since October 2003 (13.98%), a period in which the generation born after 1994 had not yet reached 10 years of age.

At the age of 27, married and with a daughter, Stephanie is looking for strategies to save money, cutting back on routine household expenses in the north of São Paulo.

Using the washing machine less times a week is one of the measures taken to try to lower the electricity bill.

“I felt more the difference in the increase in expenses from the middle of last year to here”, says she, who has completed high school and works as a nanny, entertainer at children’s parties and personal organizer.

For Fernanda Lima, who lives in Rio de Janeiro with her boyfriend, what most impacts her day-to-day is the supermarket food inflation.

Due to the high prices, she decided to replace part of the products in the shopping basket. The consumption of beef and chicken decreased.

“Now it’s normal to pick up several leaflets from the supermarket and keep an eye on prices”, says Fernanda, who has a degree in human resources management and works in the IT (information technology) area.

Car parked in the garage and consumption postponed

In the case of Iago Madureira, what has been weighing the most is fuel inflation. Therefore, the young man has left the car parked longer in the garage.

With a liter of gasoline above R$7, he is making more daily commutes on the subway in the Federal District, where he lives with his mother.

“Before, the cost of fuel was around R$260, R$280, each time I filled the car’s tank. Nowadays I don’t have the luxury of filling it up. I’m even afraid of the value it can give.”

Visits to restaurants became scarcer. As a precaution, even the plan to live alone was postponed, according to the young man, who has a degree in foreign trade and studies international relations.

“I dream of living alone. But this is more difficult now. Electricity bills and other day-to-day expenses end up distancing this plan”, says Madureira, who was born in 1997 and works as an administrative assistant.

Luiz Antônio Lourenço, 25, also turned on the warning signal with prices. In recent months, the young man began to research more products in the supermarket before shopping.

In addition, she decided to postpone the exchange of her cell phone and furniture and utensils for the house, in the Minas Gerais municipality of Esmeraldas (60 km from Belo Horizonte), where she lives with her boyfriend.

Born in 1996, Lourenço has a degree in librarianship and works as an administrative assistant.

“Now, I don’t go out as much for leisure reasons. I end up planning more before doing something. You have to think about the long term”, he points out.

Scenario is “pretty bad”, says economist

According to analysts, the rise in inflation reflects a set of factors. The pandemic, on the one hand, has disrupted global production chains. As a result, it generated a shortage of inputs and impacted the prices of industrial goods at home and abroad.

Brazil has also seen dollar pressure amid recent political turmoil, as well as climate problems that made electricity bills and food more expensive.

In 2022, the inflationary scenario brings together an additional component: the Ukrainian War.

The conflict in Eastern Europe raised the prices of agricultural commodities and oil on the international market in the first quarter. The result was pressure on food and fuel in Brazil.

“The world was coming from a period of lower inflation before the pandemic. In the health crisis, there were measures to stimulate demand for goods and services, but supply did not follow this movement. There was a disconnect between supply and demand”, says the economist. Luca Mercadante, from Rio Bravo Investimentos.

“This year also has the effects of the war. Inflationary pressure, not only in Brazil, but in the whole world, is not fleeting. It has a greater persistence”, he adds.

Mercadante is also part of the generation that grew up after the implementation of the Real Plan. He was born in 1999.

For now, the financial market projects IPCA close to 8% in the 12-month period up to December 2022. The median of the estimates is 7.89%, according to the Focus bulletin, released by the BC (Central Bank).

Rio Bravo, in turn, forecasts inflation of 7.2%. However, the bias is high in the estimate, says Mercadante.

According to him, the inflationary scenario tends to continue “very bad”, even with the prospect of the IPCA decelerating until December, in relation to the current level.

“We continue with pressured production chains”, he says.

On a monthly basis, the IPCA rose 1.62% in March. It was the highest rise for the month since 1994 (42.75%), before the implementation of the real. That is, the advance was the most intense for March in 28 years. The rise slowed in April but remained high (1.06%) — the highest for the month since 1996.