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Montevideo, October 28th 2020 - 15:11 UTC

 

 

China's impact on poor Brazilians: prices of staples skyrocket, black beans 30%, rice 20%

Monday, September 14th 2020 - 11:19 UTC
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Inflation (IPCA) measured by the Brazilian Institute of Geography and Statistics (IBGE) has been 0.7% since the beginning of the year, but food has shot up 6.10%. Inflation (IPCA) measured by the Brazilian Institute of Geography and Statistics (IBGE) has been 0.7% since the beginning of the year, but food has shot up 6.10%.

Black beans are up nearly 30%, beef about 40% – Brazilians are facing a skyrocketing rise in food prices, caused by record exports to China and strong domestic demand. This rebound, amid the economic and social crisis caused by the new coronavirus pandemic, has led the president, Jair Bolsonaro, to ask the owners of supermarkets to show “patriotism” and “keep their profit margin as low as possible”.

Inflation (IPCA index) measured by the Brazilian Institute of Geography and Statistics (IBGE) has been only 0.7% since the beginning of the year, but the food item has shot up 6.10%.

Among the staples of the daily diet in Brazil, the price of rice has risen 19.3%, black beans 28.9%, corn flour 8.1% and soybean oil 18.6%.

Regarding animal proteins, according to the Getúlio Vargas Foundation (FGV), beef increased by 38%, chicken and eggs by 7.5% and pork by 19.4% between September 2019 and August 2020.

The rise is mainly explained by the growing appetite of foreign buyers, and in particular China, in a context of strong depreciation of the Brazilian real against the dollar (-36% in one year) and the trade war between Beijing and Washington , which leads the Asian giant to buy more in Brazil.

The soybean and corn harvest, of which Brazil is the first and third world producer respectively, is expected to reach historic levels this year, but that will not alleviate the situation in the domestic market.

Strong external demand “reduced the supply of these foods in the Brazilian market” because farmers prefer to export them, André Braz, an economist at FGV, told ..

Brazilian soybean exports to China increased 29.5% between January and August compared to the same period last year, according to data from the Ministry of Economy. The harvest of that grain should have an increase of 4.3% this year.

At the same time, the rise in prices of grains and oilseeds has led to higher production costs for ranchers, who feed their cows, chickens and pigs with soy and corn flour.

“The decline of the Brazilian cattle herd in the last two years” and the growing demand from China have also put pressure on the prices of this animal protein, explains Thiago Bernadino, from the Center for Advanced Studies in Applied Economics of the University of Sao Paulo (Cepea) .

Vice President Hamilton Mourao on Wednesday attributed the increase in food prices to the rise in domestic consumption, due to the emergency aid of 600 reais (about US$ 115) that the government gave since April to the poorest to deal with the pandemic, halved in September.

« The money that the government injected into the economy was much more than what people are used to, » he said.

“The problem is that the government is abandoning its policy of regulatory reserves, which allow it to intervene in the event of a sharp increase in inflation,” says Enori Barbieri, vice president of the Agrarian Federation of the State of Santa Catarina (south).

Barbieri believes that the tax exemption on rice imports, announced on Thursday, will not have much impact on the price in supermarkets, because the devaluation of the real has made purchases abroad more expensive.

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