Why Brazil’s economy is at its most fragile

It is no secret Brazil has struggled mightily with the pandemic, their economy for one has
definitely taken a toll. With businesses struggling to make pre-pandemic profits, there has been
a general increase in the price of goods. People now must spend more money on the same
services and goods, which if continued will lead to many businesses having a hard time remaining
afloat as they fight the damages of inflation.
Brazil, which has been considered one of, if not the biggest economy in South America has
struggled with its pandemic recovery and weakened currency, now must deal with the
detrimental wrath of inflation. On Wednesday, November 10th, economy officials stated that
Brazil’s inflation is increasing more than what was predicted in October, with a 10.67% general
increase in prices. The IBGE (national statistics institute) also stated that in September, the
country’s annual inflation rate was 10.25%, and has since increased in brisk fashion. The main
cause for this rate’s acceleration is shortages caused by the pandemic. When the supply for goods
is smaller, the demand will be bigger as those items become rarer, therefore they are more
valuable, this causes the price of these items to increase, thus leading to what is called inflation.
Currently in Brazil, there has been a smaller supply for some goods, therefore inflation has
occurred which has further harmed the economy of many Brazilians following a rough couple of
months induced by the pandemic. For instance, IBGE stated that in October, fuel prices increased
by 3.21%, transportation by 2.62% and food by 1.17%, impacting the lower class more than any
other. That is not the only economic problem Brazil is currently dealing with, the plumet of the
Brazilian currency has made imports more expensive as other nations don’t value the Real as
they used to. In October, the Real lost 3.9% in value against the US dollar, putting into perspective
the losses of the Brazilian currency.
Earlier in the year, Brazil made some solid progress in recovering from the pandemic. Following
the economy’s encouraging 1.2% increase in the first quarter of the year, Brazil have failed to
find stability, with the economy decreasing by 0.1% in the second quarter. This all shows that
Brazil must figure out a way around inflation, as if this is to continue, the already high poverty
rate will spike in the coming months.

Written by: Matias Gonçalves
Edited by: Anna Kissajikian