Brazilian here too. Although the URV maneuver did help psychologically, a lot of controlling the inflation had to do with the so-called "economic tripod" implemented with the Real plan, which basically involved:
- Negative primary deficit on the government budget balance;
- Floating exchange rate;
- Inflation targeting.
Addendum: the current government is just so bad at that (fiscal maneuvers to create an artificial negative primary deficit, interfering in the exchange rate by buying/selling dollars at below-market prices, etc) that our inflating is going up again. We just reached 8.17% in the last 12-month period. Compare that to 0.8% in the US for 2014, or even Brazil's 3% some 8 years ago... With the expectation of the Fed raising interests in the US with the improving economy, dollars are going to FLY out of Brazil and the already ridiculous exchange rate (1 USD = 3.15 BRL) is going to explode. Brace yourselves, inflation is coming.
Many of the things I buy in a grocery store in the USA go up 5% or 10% at a time, perhaps every year or two. Same situation with services.
The official inflation numbers for the US are very tricky. There's a lot of "adjustment" going on. I suspect that the rapidly falling prices for household electronic goods plays a big role.
The price of a 55" flat screen declining from (made up numbers) $1,500 to $500 in the last five years is small consolation if the price of meat and milk and cookies has gone up 25% over those five years.
The "basket" they use for CPI calculation is a genuinely difficult problem, since what people buy changes over time. Electronics is a great illustration - if I included 40" televisions last year, should I compare the price of this year's 40" television to last year's, or should I compare the price of this year's 50" television to last year's 40" because that's what people are buying? Both ways are right and both ways are wrong, depending on what you want the number to mean.
But even allowing for these difficulties, I still think the government keeps changing how inflation is calculated in an effort to make itself look better.
When real estate increases dramatically they measure rents, which are (in a hot real estate market) subsidized by people trying to cash in on capital appreciation. In a declining real estate market with rising rents they switch to "rent equivalents" based in some part on the cost of real estate.
You can hide pretty big increases by switching what you measure mid-stream, particularly if you just graph the YoY official inflation rate (including changes) without going back and recalculating every year using the same methodology.
And then there's the reporting. The number you hear on the news may or may not include "the volatile food and energy sectors" depending on which is lower.
There's a reason it seems prices are rising faster than the CPI reported on your drive home. They are rising faster.
That feeling you are describing happens everywhere. In the US, inflation is usually tracked by the CPI [0], which uses the average monthly price of a market basket [1].
The tricky thing is in finding the correct weights of each item in the basket as to be representative. As you can imagine, different people shop differently, so won't experience the same inflation.
I think the CPI is great for what it is, but it's easy to mistake it for something it isn't.
Everything in it is based on averages, and there are lots of differences between individuals that affect your realization of price changes.
Examples: I drive 5 minutes to work, my officemate drives 90 minutes -- gas prices mean nothing to me. If you have 4 kids, meat and dairy escalations hit you harder than average. If you're a vegan, seasonal price swings of produce are more meaningful, and factored out of CPI.
CPI also only looks at consumption. We've had 2-3% price growth with low wage growth. Less buying power magnifies price changes.
'big screen TV' is just about the worst economic indicator there is, yet it's constantly used to insult poor people and imply that their problems are simply due to being wastrels.
I was once wandering through the swampy Mekong delta, and there were huts there that didn't close fully against the weather, with dirt floors, surrounded by mosquito-laden stagnant pods... and they had big screen TVs. They weren't this year's models, and more than a few of them were CRTs, but they were still in these dirt-poor houses.
Back here in Australia, the retail market is so tight for 'big screen TVs' that it's pretty common for retailers to give four-year interest free terms. That's only $10/week for a $2k screen over 4 years, less than one hour's minimum wage, after tax. And, as you say, a big screen TV is a pretty small part of the cost of living, overall.
The sooner we abandon 'big screen tv' as a proxy for measuring wealth, the better.
i've been buying the same items (specific diet craze) from the same whole foods from 2009 to today.
my monthly cost on that alone jumped from $300ish to well into the $500.
it's mostly organic produce, a few meats, lots of seafood (which i grant that it has a very volatile market price but still)
So i'd say for quality quasi-essential products, it is even higher than that. probably because premium shops were keeping their profits a little lower because of the 2008-2010 crisis.
Come on, just look at SELIC during the second FHC government... the interest rates went sky high, the Real had a monstrous devaluation overnight (from R$ 1.32 to U$1 to R$2.16 to U$ 1).
FHC sure helped to stabilize inflation rate, but he almost destroyed brazilian economy. His second government was nothing short of a disaster.
FHC govt is interesting. It was the govt that mostly opened up to USA control. He borrowed a lot from the international funds, and made every effort to never pay more than the interest.
Also sold all state owned companies, which mostly dealt with infrastructure, creating huge foreign owned monopolies. For a while, mobile and internet was worse than it is in the USA now, but the last two governments made improvements there (for example, now for US$0.30 a day --US$9/mo!-- you have a prepaid phone with unlimited calls, text and data ...well data was pulled out of that law last months. it is now 200mb instead of unlimited)
But it was also one that most spent in advertisement. So the public loved it. And even attributes the Real to that president.
The last goverment managed to pay out all the international funds FHC borrowed from.
I am from Brazil, and although I don't like FHC party either, I remember even during the crisis of his second government, I didn't hear people blaming him all the time, I think because at the time it was understood because it had to do with the Asian crisis (the 1998 crisis affected Brazil badly), and because people still remembered how bad it was before him.
Now replying your specific question: "The current government is just so bad?"
Yes.
Many of our numbers are the worst in 20+ years, without a solid external economy justification, our troubles are not because lack of exports or other serious effects caused by other countries that were unavoidable, but purely incompetence (or malice...)
Brazil consumers have the lowest confidence in 22 years, our GDP will have the biggest decrease in 24 years, inflation is the highest since FHC fixed it 20 years ago, the income of people, even if you ignore the exchange rate and count only in absolute BRL numbers, is decreasing, and although unemployment is "low" according to the government, the actual number of employed people is low too*
Also the president batantly lied at her campaign (she said she would not do lots of things she immediately did as soon she was re-"elected"), and lied about the energy situation.
The energy situation lie: Because the lack of rains in Brazil (that seemly is linked to the lack of rains in California), we can't rely on Hidroelectric powerplants, but the distribution lines are not all done, meaning that brownouts in some areas are likely (and we even had a country-wide blackout this year, when in the hottest day for some time, the extra power draw from air conditioners made the power lines overload), the president made several discourses with lies about this, trying to hide the situation for her upcoming campaign, she ended forcing the government as whole to give lots of conflicting information about the power situation, as result lots of important business that rely on great amounts of electricity (for example several types of metallurgy, manufacturing, cement industry) to stop investments, this started to cause unemployment and other issues long before Petrobras problems came to light.
Who in their right mind would invest in a country where you can't find reliable information about the infrastructure situation?
And of course, we have Petrobras issues by itself (for example for some problems caused while the president was working for Petrobras and even signed documents that caused the issues, she just stated she didn't read the documents... so she is grossly incoptent, or a malicious liar)
Of course, I might be biased, since my family has a personal bone to pick with the president (the president approved some stunts in 2013 and 2014 that led to several companies that work for the government get defaulted, my family in turn sold stuff for those companies, that defaulted us, saying they would pay us when the government paid them...)
* Brazil copied US bullshit unemployment number: you are only "unemployed" if you have zero income, government handouts included, and is looking for work, if you gave up, or get money from the government, or has income, even if it is tiny and from an illegal source, you are not unemployed
Good points. I just don't agree with the rethoric that this is the worst Brazil ever had. Specially ignoring that in the nineties no corruption scandal was ever investigated... there are numerous cases... sadly all hidden under the carpet.
I hope that someday people will judge their representatives not based on their sympathy for a given party, but on actual meritocracy.
I don't think the actual government is the best, I just think it is the least worst we could get at the present time.
So we agree to disagree. The PT (workers party) government changed Brazil forever by:
- creating thousands of politically-appointed public servant jobs and other money-sinks.
- corroding the power of one of the best legacies from the former Cardozo president: Lei de Responsabilidade Fiscal (fical responsability act), that was meant to prevent the executive from overspending.
Their ideas are close to the "Chavismo" that destroyed Venezuela, and they are doing a pretty good job trashing Brazil.
You do realize lack of water and power is a problem of the State government (governor) and not federal government (president), right?
Edit: which for sao paulo, where i guess you are from, it all started with PSDB, same party as FHC. Also same governor that started to use military police on pacific protests.
Energy: it was the Federal policy of subsidizing energy and the price caps that led to the energy crisis. The (few) private companies had little incentive to invest in improving capacity of the grid, the state-owned ones were a mere instrument to keep the cronyism going. The government has been chanting about Petrobras and pré-sal for at least 10 years now, even though they know that it is yet to be determined if it will be net-positive in terms of revenue. If at least it was a calculated risk but Petrobras was well-managed, then so be it. But it isn't, and Petrobras corruption scandal is directly linked to Dilma.
Had the Federal government a sound plan for reducing the dependency on hydro-electric power, or at least allowing the construction of new plants, the brownouts wouldn't have happened, even if the "drought" was real. Hadn't the Federal Government managed to completely dilapidate Petrobras for pure political benefit, it could've been given the benefit of the doubt. But it didn't, and it should be pointed as responsible for the current crisis.
Regarding water: I'd buy the argument that it was a state-level issue if it was only seen in one or two states, but it is ongoing in the whole Southeast and Midwest of the country. And while levels of waste in Brazil are bad, the cheap cost of water to farming and deforestation are much worse.
This "is a state-level problem" is just an excuse from PT to take a jab at São Paulo's governor. They never point out the problems existing in PT-governed states. Another thing is that those pro-PT argue that the problem in São Paulo is due to Sabesp being a private company. This is just a lame excuse to support the notion that it should be state owned. The problem is not being private or public, the problem is that it is a monopoly.
If ANA (a federal agency, by the way) was serious about solving the issue, they could enact a bunch of norms to force better control of the resources and break all monopolistic companies into smaller ones and force competition. But because "privatization" and "free market" are verboten words in this government narrative, it will never happen.
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Just an aside: this whole thread has already derailed completely from the original link and it has become a point for the Brazilians to discuss politics and each to show their allegiances. I'm all for a good, rational discussion, but I'm yet to see this irt politics, especially in Brazil. Instead of arguing on the ideas, people make "their" political party as part of their identity and simply refuse to have constructive dialogue. It is worse than football. How about we keep this off Hacker News?
>> Just an aside: this whole thread has already derailed completely from the original link and it has become a point for the Brazilians to discuss politics and each to show their allegiances. I'm all for a good, rational discussion, but I'm yet to see this irt politics, especially in Brazil. Instead of arguing on the ideas, people make "their" political party as part of their identity and simply refuse to have constructive dialogue. It is worse than football. How about we keep this off Hacker News?
This is what I meant when I said that I wish for the day when people will not make judgements based solely on their political affinity.
Sadly, it is almost impossible to talk about politics when people start to see you as an enemy just because you disagree with them. It is even worse when you see, as it happened in Brazil, people with good education going to the streets asking for a military coup... that is crazy. A democracy is better than a dictatorship, even a corrupt democracy, at least you can change the president after a couple of years.
Looks like we are not getting out of this discussion, so here we go...
This "people with good education asking for a military coup" is blown out of proportion by supporters of PT. Perhaps a few crazies do indeed think that, but most of the ones during the protests were talking about "intervention", due to considered abuse of the institutions by this corrupt government. And even that can be done in a totally legal and according to a due democratic process.
However, what the supporters of PT keep repeating is that "the opposition wants a coup", you included. So you are doing no better than "the other side of the trenches". If you really want to engage in the discussion, you should be prepared to argue with the "best" part of the opposition, instead of just trying to invalidate the whole other side based on a few exceptions.
> It is even worse when you see, as it happened in Brazil, people with good education going to the streets asking for a military coup... that is crazy
That's such a silly thing to point out. In every single anti-government protest that happened so far, pro-military groups were the tiniest minority. Look up Datafolha's research about the Paulista protests - even though that research has several problems, it makes it pretty clear that almost everybody there opposed a coup (or "intervention").
aren't they building several new hydro plants across the crountry, even the controversial itaipu (which i completely disagree with)?
and you are completely paradoxal... try to read your comments before posting :) should the water company be state owned or private? you keep changing your mind every paragraph
2) It is not ready yet. The current project is being discussed since 2002. Estimated date to open is ~2019. Which is yet-another sign that they are simply ineffective, incompetent, or both. Even if they are aware that a plant will take 15+ years to be built, they'd have to come up with a plan to support the grid in the mean time.[1]
3) So you want to play armchair energy expert: without building something like Belo Monte, how would you secure Brazil's energy needs? What do you think is a viable plan that allows the production capacity to increase, keep costs low and fair? [2] Please don't say "Solar" or "Wind" if you don't have any actual cost analysis and a feasible strategy.
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Regarding public vs private: I really should recommend you reading again, and showing me any passage where I defend one or the other. In what I wrote previously, I haven't said anything of some sort, rather I just pointed out the flaws in the argument used by the "SABESP-is-bad-because-it-is-private" and the "none-of-this-would-happen-if-it-was-a-public-company" crowds. What I said is the situation of monopoly is bad. Which part you don't understand?
Also, do you see how this conversation is already completely off-topic? Now you want to include "police violence against peaceful protests" in your laundry list of talking points. I really don't want to go down this hole, when you can't even realize that the "water crisis" is not restricted to São Paulo, and that the Federal Government is also responsible. If you really want to discuss the topic at hand, fine. If you just want to shout against your political opponents, count me out.
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[1]: One of the most valid criticisms against São Paulo government is in how slow they are to extend public transportation. What happens is that a metrô station is planned for one demographic and by the time it is opened, it is already under-dimensioned. But at least they try to establish plans for the time of construction. The Federal government not even gets to do that.
[2]: The current mechanisms give the illusion of low prices when they get their bill, but the true costs are hidden because the subsidies are only possible through taxation. So people pay low bills, but a lot in taxes. It is perverse.
First elections in Brazil are mandatory, people tend to vote on the "least worst" candidate, or in the one they remember more from ads.
Second, elections in Brazil don't have vote re-counts, when you input a candidate in the electronic pooling stations, they just add a "+1" to some variable, or at least this is what they should do, the government don't allow third parties to examine the stations, so there is no way to know what they are really counting.
Finally, in lots of nearby countries there has been elections with similar results (members of Forum de São Paulo winning with around 51 or 52% of the votes) and the same company took care of the elections in all those countries.
The electronic devices are, from a technical point of view, flawed. That doesn't mean the votes have been tampered... though I agree that this should be fixed.
On the other side, this same electronic devices are in use since 1996, thus all elections ever since fall under the same suspicion (even the one won by FHC).
The problem is that political parties only act when they are loosing. Now, the losers claim the devices can be tampered with... of course they can. But why didn't they make these devices right when they were in power?
Your replies make me assume you like PT and dislike PSDB and assume I like PSDB...
that is not my point, and I has always been against the electronic ballots, I don't trust election results of any election since the electronic pooling stations, I am only more distrustful at these elections, because of the other things I mentioned (several friends of PT winning with 51%, the same company working on all those elections, some cities where people proved there was outright fraud, for example in one city people found memory cards and voter lists in the trash) and because of the popularity pools (before, and after the elections Dilma was unpopular, only DURING the elections her popularity suddenly rose... I don't believe people are THAT stupid)
For lack of a better option. I left Brazil, so I don't vote anymore, but had I still been there, I would probably have voted for Dilma even though I'm strongly against her party. She was the "least worse" alternative.
Yes, voting is compulsory (required by law) in Brazil. Citizens can also cast a null/blank ballot if they feel that the candidates on the ballot should not be elected. Despite this, only 76% of citizens actually voted in the last presidential election. 69% of the population voted for one of the candidates, only 7% voted null/blank. [1]
as i said in another comment, FHC is the one that most spent in advertisement.
Yes, GDP is bad now, but employment is at an all time high. while it was at an all time low during FHC.
employment rates is something odd. while GDP everyone fells somewhat equally, employment is only felt by that group of people. So you have to try hard to not alienate yourself on those matters.
Yes, the SELIC exploded and the Real was devalued overnight as soon as people realized that the party currently in power had chances to win an election.
Disaster is what we are living through now. Can you get any example of hight inflation happening at the same time as hight interest rates on Brazil since the Real Plan? Or, can you get any other example of hight inflation at the same time as a decreasing GDP? Or can you get any failed coup from FHC times?
FHC surely didn't do everything right. I have plenty of complaints. But to even compare his government to any of PT's is absurd.
Get your facts right. The devaluation happened in 1999, a time when thinking that Lula would win an election was actually a joke.
If you go to BACEN you can look for yourself to get the historic data on inflation and SELIC interest rates. FHC was able to both have high interest rates, high inflation rate and a broken economy (or did you forget that brazil had to ask IMF for a huge money lend?)...
I don't know what you mean by a coupe... but it is well known that FHC paid congress men to pass the law allowing him to be re-elected. Curiosly, now they think re-election is bad... go figure.
alberich, these kids debating politics today don't like to take leverage of internet to understand what really happened in their country. And then they come here to HN to say bad things about Brazil looking for "liberals" support. Silly boys.
FOUR DRINKING BUDDIES CAME UP WITH THIS CRAZY, UNLIKELY PLAN TO STOP INFLATION, YOU WON'T BELIEVE WHAT HAPPENED NEXT!
I can see that in some social media clickbait site.
The "Original Sin" of not Governments not being able to get debt in the same currency they are able to collect taxes.
So, when the main source of USD suffers in some sense (export prices, or some kind of supply shock) the Government (unable to get funds) must retort to fiscal policy to meet its commitments. And fiscal policy is the number #1 recipe to get (hyper-)inflation
Primary deficit is how much debt is generated every year by a government, ignoring old debts repayments.
If you primary deficit is positive, you need to borrow money even if all your creditors decided to pardon your old debts.
Fernando Henrique Cardoso made a law that mayors, governors and president are criminably liable for reaching the end of their term with primary deficit (thus putting the next person in charge in trouble).
Dilma Rouseff in 2014 had a primary deficit of positive 10 billion (meaning the government would need to borrow 10 billion more than usual).
She circunvented this by pulling a ugly stunt on the congress (she sent a law to the congress, where the law said that some of government spenditure "don't count" toward the balance, then she threatened to not sign the bill that allow congressmen to spend some federal money to help their homebase unless the congress approved her law)
Yep... The term the guy used is the english name for it, in portuguese we call it "surplus" and that is it :P
So in short: Fernando Henrique in 1994 made a law where if you don't make a surplus before debt payments, you are a criminal (of the sort that get arrested)
Dilma Rouseff not only made a deficit (instead of a surplus), she made a law to circunvent the previous law, also her law has the pecualiarity that the project that "don't count" in the debts are her party pet projects (the projects that they put on TV to ask for votes), a possible loophole in the law is that she can spend "infinite" money on her pet projects now.
It used to be this way, but she is using "creative accounting" in order to do that, for example, by making state-owned companies pay some expenses and arguing at the supreme court that these operations are not loans. These maneuvers are nicknamed "pedalada fiscal" (fiscal bike-shredding).
I guess she will be allowed to get away with this because by now the workers party has appointed most of the judges.
Any resemblance with the situation at Venezuela is not mere coincidence, including the situation of the huge state-owned oil monopolies on both countries (Petrobras in Brazil and PDVSA in Venezuela).
- Negative primary deficit on the government budget balance;
- Floating exchange rate;
- Inflation targeting.
Addendum: the current government is just so bad at that (fiscal maneuvers to create an artificial negative primary deficit, interfering in the exchange rate by buying/selling dollars at below-market prices, etc) that our inflating is going up again. We just reached 8.17% in the last 12-month period. Compare that to 0.8% in the US for 2014, or even Brazil's 3% some 8 years ago... With the expectation of the Fed raising interests in the US with the improving economy, dollars are going to FLY out of Brazil and the already ridiculous exchange rate (1 USD = 3.15 BRL) is going to explode. Brace yourselves, inflation is coming.
edit: typo