Prices in Rio have gone crazy

For work and family, I come and go from  Europe to Rio all the time. For the last year, every time I got out the Antonio Carlos Jobim aerport, I was surprised by higher prices.

Gotta eat everyday right? Here is a flavor of what you will pay in Rio.

Meal in a kilo restaurant  – 40 to 50 reais / kilo. A human being like me would eat 300 .. 400 grs..  so you will pay around 20 reais for a meal = 8, 90 euros. 

Italia ice cream  1 ball – 6 reais = 2,65 euros

Caipirinha – 14 reais = 6,20 euros

Cafe Espresso – 3,50 reais = 1,55 euros

What I don’t understand is this: Minimum wages in Brazil: 545,00 reais = 241 euros. Go figure.

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About Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Bureau. She is a member of the Brazilian Investment Analysts Association (APIMEC-Rio) where she served as Corporate Relations Director and later, on the board. Hildete advises companies doing business in Brazil. She lives between Paris and Rio and is a member of the Harvard Club of Paris and of the Mercosur Women’s Forum.
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15 Responses to Prices in Rio have gone crazy

  1. Garrett says:

    my guess is they are not eating in the same places… 🙂

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  2. you’are right Garrett.. they probably eat somewhere else.. but still, labor is cheaper ..it should impact prices somehow.

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  3. Garrett says:

    I believe both of would agree under classic and most contemporary economic models, this would be true. But, and this is my belief, the economy of Brasil may be setting several precedants. Sugar is already through the roof and ethanol is beimg imported like it was going out of style. These 2 factors alone should be impacting but as we both know, nada, zip, forget-it…

    As Brazil was able to avoid the financial crisis through some innovative vehicles and regulations, my thought process is wondering if they may have reversed — or even isolated — some traditional economic impacts. This is all speculative as I am still on the lower end of learning the economic and financial history of Brasil.

    Whatever is holding the wages, this will definitely be worth checking out. Cannot imagine a reverse hyperinflation… Knock on wood…

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  4. Samuel says:

    I live in Brazil, I tell you that the crisis was avoided because our taxes are around 60% of the wages of Brazil, Lula lowered these taxes stimulate the economy, the prices mentioned Brazilians do not eat at airports (I’m sorry, but this is so foreign to), it is very expensive, usually a cafe here costs R$ 0.50, lunch is R$ 6.00 to R$ 30.00 maximum, the minimum wage do not know why it exists, who gain is very poor, the average wage in Brazil is about R$ 1.500, so here there is much evasion, the government could not punish everyone, unfortunately our salaries are far from Europe and USA, but Brazil has improved a lot, but still has a lot to improve, we are growing much China is buying much of Brazil, this is a great help.

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  5. Malcolm says:

    Food prices in Sao Paulo have also risen a lot over the last 1-2 years, although as a rough estimate I would guess the restaurant prices for the items you mention are about 25% or so less (perhaps due to a soak-the-tourists phenomenon in Rio?). My developing hypothesis is that food prices in Brazil are increasing primarily as a result of three factors: (1) the US’ effective exportation of price inflation all over the world through its QE programs; (2) very large foreign capital inflows into Brazil; and (3) an arguably flawed commodities derivatives market (courtesy of Goldman Sachs :-)). I think this is a testable hypothesis … and I wish I had the time to test it too.

    References:
    (1) http://www.reuters.com/article/2011/07/14/usa-fed-discount-idUSN1E76D1QH20110714
    (2) http://en.mercopress.com/2011/03/10/massive-inflow-of-foreign-capital-into-brazil-during-first-two-months-of-2011
    (3) http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis

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  6. Garrett says:

    The rise in food prices is global — this almost always follows a financial crisis, whether the crisis is internal, within a targeted trading group or global. There are shortages where some were accustomed to abundances — in the case for Brasil, it is sugar. Per the WFP (World Food Programme) at the U.N., “Global food prices are at a level just below their historic peak in February as extreme weather in North America and political unrest in the Middle East fuel volatility on the markets.” Which brings up a good point — if there is enough instability in enough key areas throughout the world, then I believe we are all going to be affected.

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  7. Garrett says:

    I hate it when I hit the enter key too soon…

    A discussion of food prices at the global level is available here: http://www.wfp.org/stories/rising-food-prices-10-questions-answered There is a chart at the bottom and you will see, after clicking on it and reviewing the various indices, the price increases started in January 2009. As mentioned by the article, and I believe that they are sharing, several areas of unrest are not helping as — meaning unless these areas settle down then we can expect prices to be higher-than-normal. As opposed to specific relationships between countries as Malcolm mentions, the global situation is pretty much up to the G20 to address. But this is nothing new, being a history buff I have read several accounts since the 1600’s where food prices have sky-rocketed due to instability elsewhere. In the era of then, it was mostly confined to neighboring countries — given we are now global, the stage has changed but the play remains the same.

    One thing is definite, there is no one definite cause and there is no one definite solution…

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  8. Dina Goldin says:

    The sky-high crime rate in Rio is no secret. One can find pockets of safety and cleanliness, but that comes at a price of costing WAY more than the average place. Those are the places that tourists and foreigners (especially those with business accounts) stick to, and hence the sticker shock. As Samuel’s post confirms, these prices are NOT the average prices, or even prices that a relatively well-to-do Brazilian like him pays. When in LA, if one did all the shopping and eating on Rodeo Drive, one would also wonder how most Angelinos (the ones living in poor neighborhoods that plague the city) can afford to survive.

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  9. As I said, they probably eat elsewhere 🙂

    Smart-alec comments aside, both Dina and Hildete bring up good points. Actually, everyone here does. It is true for every country, the more the people concentrated in one area, the more likely prices are not going to be the same as if bought straight off the farm.

    The 20-July issue Veja talks about prices of everything with their cover story (a preço de banana) — I have not been able to read it myself but my friends outside the cities of BH and SP have brought up this very issue several times in the past day.

    Whatever is happening, will definitely be worth maintaining a daily watch on the financial and economic news in Brasil. The government has been trying to cool down the economy to keep the Real near 1,60 per U.S. dollar — but it has been more like 1.56. They would love to get the ratio back to 2:1 but until the economy in the USA has been addressed by an Executive and Congress branch that has a backbone, I seriously doubt this will happen too soon.

    But as all the comments have pointed out – the source of the problem and the solution has reached global levels. Last time this happened was in 1927…. We all know what happened 2 years later. And I hope I am dead wrong with my gut feeling about this one….

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    • Malcolm says:

      That’s an interesting point, HRIS: My (unassisted and, so, perhaps incorrect) recollection is that the US money/credit supply expanded rapidly prior to the 1930 depression, then followed by a rapid contraction. I personally believe Bernanke is doing his best to stabilize the US economy, which I think he sees as preventing US price deflation first (in terms of broad CPI measures); worrying about price inflation elsewhere and in future periods later. If the QE1, QE2, …, QEn programs stabilize prices in the US, this of course does not mean they have the same effect elsewhere.

      I also think the Brazilian central bank is doing their best to keep the USD/BRL exchange rate stable, but it seems a practical impossibility given the US QE programs and the recent near-mania foreigners have for Brazilian assets. My sincere hope is that this does not cause the almost comically repetitive cycle of asset-price-bubbles-followed-by-collapse. It always seems countries lose much of their sovereignty when this happens (see, e.g., Stiglitz’ “Globalization and Its Discontents”), and Brazil has much too beautiful a culture and country for Brazilians to allow this to happen.

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  10. I’be tried to open an account here but for the life of me, I keep missing where the new account setup can be found….

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  11. Speaking of opening an account and Brazilian interest rates and costs, I have tried to buy Brazilian bonds as an individual but with no success. You can purchase through funds and other investment entities but the yield is reduced to much less than 1/2 the coupon value. Even if I invest over a 100k, this is the information I have. Similarly, in Brazil with private bankers such as Itau Personallite it is basically the same. Another instance of banks taking the risk, getting the return and using the spread.

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