WHY BRAZIL IS SO EXPENSIVE?
Autor: Carlos Bispo | Publicado: 2013-11-01T10:39:00-04:00






Travelling around the
world&nbsp; I have facing some importants
differences betwwen the prices in Brazil and the prices in other places, one of
the examples is the price of PS4 that will be launched in US for USD 399 and in
Brazil around USD 1,800, makes sense? What is the problem? Taxes??? How the greengos...can understand this?



A recent survey by
Tripadvisor, a travel website, put Oslo, the capital of super-rich Norway, as
the world’s priciest destination, with a one-night stay in a four-star hotel
with dinner and drinks for two costing more than $600. But near the top of the
sticker-shock rankings is a surprise entry: upper-middle-income Brazil. Hotels
in São Paulo, the business capital, or beachside Rio de Janeiro, cost more than
in London or Zurich. Visitors who go window-shopping will find the high prices
hit locals too. Clothes, cosmetics, electronics and cars are all more
expensive, sometimes much more, than in most other places.&nbsp;The Economist’s&nbsp;Big Mac Index&nbsp;finds
Brazilian burgers are dearer than everywhere else except in three much richer
countries, (Norway, Sweden, Switzerland) and one dysfunctional one (Venezuela).
So why is Brazil so pricey?



A&nbsp;special
report&nbsp;in this week’s issue explores the question in more
detail. A big part of the answer is currency appreciation, caused by economic
stabilisation in the 1990s and a huge increase in commodity exports since then.
A decade ago a dollar bought 3.5 reais; it now buys less than 2.3 reais—which
understates the scale of the change, since Brazil’s inflation was much higher,
so reais should have become cheaper, not more expensive. For Brazilians,
though, currency appreciation has actually made life cheaper by cutting the
price of imports. They point to the fabled&nbsp;custo Brasil&nbsp;(Brazil cost), as the country’s value-for-money problem
has long been known. IMF figures show that in most poor and middle-income
countries, money goes further than market rates would suggest because wages are
lower and non-tradable goods are cheaper. A Mexican’s spending power, for
example, is 45% higher at home than if he bought dollars and shopped across the
border. But a Brazilian can buy little more at home than he can in the United
States.



The&nbsp;custo Brasil&nbsp;has many ingredients, including high taxes (36% of GDP,
way out of line with the 21% average for upper-middle-income countries),
swingeing import duties and rigid labour laws that make it hard to use workers
efficiently. Poor roads and a limited rail network push up freight costs. High
interest rates mean firms must spend a packet on financing; high crime adds
heavy security costs to their overheads. A terrible education system makes
Brazil the world’s second-hardest place for firms to find the skills they need,
according to Manpower Group, behind only ageing Japan. Soaring labour costs,
which have doubled in a decade as big hikes to the minimum wage set the tone
for pay negotiations across the board, have added a new ingredient to the old
recipe.


Big price differences
mean imports are increasingly taking market share from locals and even
Brazilians of relatively modest means have taken to stocking up on foreign
shopping-trips. A recent weakening of the currency will give local
manufacturers some breathing space, but in the long term the only solution is to
become more efficient. The World Bank’s annual&nbsp;report on doing business&nbsp;in
a range of countries reads like a productivity to-do list for Brazil: make it
simpler to start up and wind up companies; cut and streamline taxes; increase
domestic savings and investment. A recent study by the Boston Consulting Group
estimated that three-quarters of Brazil’s growth in the past decade came from
adding more workers and only a quarter from productivity gains. With few more
workers to add, the only way Brazil can start to grow once more is by using the
ones it has much better—and becoming cheaper again.