Brazil inflation distorts prices of basic consumer goods, which vary up to 500% between stores – CNC

RIO DE JANEIRO, BRAZIL – Soaring inflation, which hit 10% in the 12 months through September, according to the IPCA-15, has brought an additional problem for Brazilians when it is time to shop: a large price variation for the same product in different stores.

A survey of the price of 15 basic consumer items, including food, hygiene and cleaning products, shows a difference of up to 578% in the price of the same toothpaste. A 90-gram package of the same brand was found to cost R$1.18 (22¢) at the lowest price, and R$8 at the highest.

Triple-digit discrepancies between the highest and lowest prices for the same product – something not uncommon before the 1994 Real Plan – were also found for milk (408.3%), soap (328.3%), pasta (184.3%), salt (155.2%), beans (126.8%), coffee (106.7%) and washing powder (104.7%). Soybean oil and rice figured in the survey with 69.5% and 70.7% variations, respectively.

The survey conducted by the National Confederation of Goods Trade, Services and Tourism (CNC) chief economist Fábio Bentes, shows that all 15 items registered significant variations. The most modest difference, 20.8%, was found in packaged bread, whose highest price was R$7.20 and the lowest was R$5.96.

The prices were surveyed last Friday, through the Google Shopping Brazil tool. Among the criteria used for the nationwide survey, which included major retailers, are the fact that the products are part of the basic consumption of Brazilians and available in at least 10 physical or online stores.

“The variations between the highest and lowest prices of the same product tend to generally increase when inflation expectations are divergent,” Bentes says.

Currently, when 12-month inflation is over 10%, and inflation expectations, according to the Central Bank’s Focus Report, have been rising for 25 consecutive weeks (about 6 months), setting a price is quite a complex task, Bentes says.

“The divergence between the highest and lowest prices is fed by expectations of higher inflation, because when businesses are going to set a price, they must consider the cost of energy, negotiation with the manufacturer and also the expectation of future inflation to be able to protect their margin,” he argues.

This large price variation is a consequence of the strategies adopted by retailers. “Not all retailers are going to increase their prices, some are going to keep prices low in order to try to gain sales volume. The result of these strategies is a wide dispersion of prices.”

PANDEMIC

In addition to high volatility in inflation expectations, economist Fábio Silveira, partner at MacroSector consulting, attributes this great dispersion between prices to the disorganization of production chains because of the pandemic.

“Since March last year, the production process has been volatile and disorderly,” the economist recalls. In this period, production lines were interrupted and then restarted, with inputs bought at different prices in the domestic and international markets. “There is a huge mismatch not only because of production cycles but also because of raw material costs, exchange rate variations, and inventory rotation,” Silveira notes.

He says the global economy is faced with great irrationality in production chains and in price setting processes, and the situation is worse in Brazil. Silveira believes that it will take up to 2 years for the balance to be reestablished and for the prices of a product to converge to the same level.

Based on the CNC survey, the report chose 6 items – rice, beans, sugar, coffee, milk, and soybean oil – and calculated the cost of this basket at its highest and lowest price. The basket price was calculated considering the amount consumed by a 4-person household, a criterion followed by São Paulo’s PROCON Foundation.

The basket with the most expensive products would cost R$428.98, more than twice the price of the same basket with the cheapest products (R$204.92).

Bentes recalls that food at home represents 25% of the average Brazilian’s budget, according to IBGE’s Household Budget Survey.

Nowadays, the Internet is an important tool to research prices. “It became easier for people who have access to information,” the economist says.

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