Grocery stores lock up their meat in Brazil as inflation makes steaks too expensive
(Bloomberg) – Signs of the pain caused by inflation are everywhere in the favelas surrounding Brazil’s metropolises.
There is reclaimed firewood that replaces cooking gas in kitchens; and fish heads and bones fell into stews instead of beef and chicken; and the elaborate alarm tags that grocers wrap around cuts of steak to deter theft; and the wave of graffiti emblazoned with the word “hunger” in bold letters, building after building.
In the region that has become Exhibit A of the inflation spurt reverberating through the global economy, no country has suffered such an intense outbreak as Brazil. Consumer prices are rising at an annual rate of more than 10%, compared to 1.9% in 2020. To make matters worse, the economy has slipped back into recession just months after beginning its timid recovery from the collapse of Last year.
This combo, known in economic circles as stagflation, hits the poorest Brazilians the hardest. Spikes in the cost of food, gas and electricity have pushed annual inflation for low-income families to 11.4%, according to the Institute of Applied Economics, a research agency backed by the state known as Ipea. The rate is much lower – 9.3% – for the wealthiest, underscoring a hard truth: the pandemic has exacerbated inequality in Latin America and much of the rest of the developing world.
For Rubia Alves, inflation meant serving chocolate milk and bread to her two children for dinner. With cooking gas prices up 30% this year, preparing basic Brazilian dishes like rice and beans had become a luxury she couldn’t afford on the $200-a-month salary her husband wins as a doorman in Brasilia.
“I can’t spend two hours with the stove on,” said Alves, 29, from his small house in a slum on the outskirts of the capital.
On average, wages for Brazilians fell 4% after adjusting for inflation in the third quarter alone, according to government data. Moreover, only one in four children receiving help from the government’s public health system eats three meals a day this year. In 2018, that number was 62%.
Hunger in Latin America hit its highest level in 20 years last year amid a pandemic
All this poses a problem for President Jair Bolsonaro a year before his re-election. With his popularity waning, he has unveiled several programs to help working-class Brazilians against the advice of advisers who fear the measures will only stoke inflation. A social program will roughly double cash transfers to the poor. Another is to subsidize cooking gas.
Inflation here is an old enemy that policymakers thought they had tamed over the past three decades. But then came the pandemic, causing global supply chain disruptions and a surge in raw materials that made items like food and fuel more expensive across the world.
Inflation is raging everywhere, but it’s worst in Latin America
In Brazil, the pain was compounded by a severe drought that raised the cost of producing energy and a falling currency, which further drove up the cost of imported goods. The central bank has aggressively raised interest rates this year, pushing them up 5.75 percentage points, in an effort to stabilize the real rate and contain inflation.
Last year, the Bolsonaro administration spent heavily to mitigate the effects of the pandemic, driving extreme poverty levels to a record high of 4.6% from around 11% in 2019, according to Foundation data. Getulio Vargas. But once emergency aid ran out earlier this year, poverty returned with a vengeance. Today, that figure is 13%.
Marcos Barreto can see the consequences of the number of burn victims presenting to the public hospital where he works in Recife, a coastal city in northern Brazil.
An alternative to cooking gas that residents of Recife have started using is ethanol because, he says, it’s cheaper than coal, doesn’t smell like gasoline, and is easier to find in cities as firewood. But the ethanol flame burns blue, making it hard to see and dangerous. Barreto has so many serious burn cases now — about 50 a month — that he’s often short of beds.
“People have turned to ethanol at a rapid pace,” he says.
The growing gap between the rich and the poor is becoming more glaring day by day. A few weeks ago, a Brasilia steakhouse popular with politicians and lobbyists announced a Kobe Beef Festival. For 352 reais ($62) – about a third of the country’s monthly minimum wage – VIP customers could feast on two pounds of exclusive wagyu meat.
About fifteen kilometers away, Nilda Maria da Silva has not eaten meat for months. The 65-year-old street vendor, who sells socks, scarves and shirts at her stall in a small town outside Brasilia, eats just one egg mixed with flour each day.
She says she fears she won’t be able to afford it soon. The eggs she buys are 28% more expensive than a year ago. And meat, flour, sugar and vegetables have all increased by more than 10%.
Soaring meat prices drove more people to Wallace Dionisio’s fish market, a few blocks from da Silva’s stand. “Fish is cheaper than meat, so people buy more fish,” Dionisio says.
Yet it’s not the expensive fillets – salmon or trout – that buyers are buying. These are the cheapest cuts, he says.
No. 1 on the list: fish heads, which cost $1 a piece.
The last time Dionisio saw this type of demand for heads was in the 1990s, when he was a boy helping his father in the store and inflation was over 1,000% a year.
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