The Brazilian Real has broadly been appreciating against the dollar since 2003. This reflects the strong economic growth experienced by Brazil last decade with ~ 5% average annual GDP growth. Per capita GDP has more than doubled from 2005 to $ 5700 in 2013 (per capita PPP $ 10200). Offlate though growth has fallen off the cliff.
High economic growth seems to have set off a consumerist frenzy. Coupled with high taxes, import tariffs (negating the positive impact of a strong currency) and high minimum wages means a cascading impact of high retail prices and leading to what is locally known as “Custo Brasil” or “Brazil Cost”.
Here is a sample of Brazilian prices;
- Cocktail – $10,
- Cheeseburger – $17 ,
- Pepperoni pizza – $35.
- I – Phone 5S – $ 1200 which is 5x the retail price in US.
- Nike Flyknit Lunar 2 – $313 at a Rio shopping mall which is 3x the price in US.
- Levi 501 jeans – $80.
- McDonalds burger – $ 6.28 (is among the most expensive in the world)
This reflects in the very high consumer price inflation in Brazil with the price index having doubled over past 10 years translating into 7% inflation compounded annually leading to the central bank there raising rates to curb it.
Falling economic growth offlate coupled with high prices and the high costs involved in staging the sporting spectacle i.e. FIFA WC 2014 has led to street protests in Brazil which started with increase in bus fares. NYT has this .