Farsul warns of possible increase in food prices

The lack of a fiscal policy anchored by the Federal Government has been causing concern in the economic area. The lack of definition of a fiscal anchor will trigger an inflationary process that will impact not only the prices of food on the shelves, but also the economy in general. The alert comes from Farsul's Economic Advisory.

In the period immediately after the pandemic, there was inflation as a result of government actions to inject money into the economy, as explained by Farsul's Chief Economist, Antônio da Luz, "We had an extremely high inflationary process in the world and that was something expected as a result of all the governments have thrown piles of money into the economy, including the Brazilian government, such as Emergency Aid, Pronamp, aid to states and municipalities. It was almost R$600 billion in two years to prevent the economy from crashing. And it was right, the USA did it , Europe too", he comments.

Luz explains that the measure was necessary for the situation "When this was done, we wanted to defend the economy, protect the economic fabric, but the consequence is inflation, we know that this generates inflation. Then, to correct it, it is necessary to increase interest rates They are the instrument to combat inflation", he states, remembering that, in the case of the USA, inflation reached the highest level in 40 years, requiring a proportional increase in interest rates. The economist highlights that both in North America and Europe, the interest rate continues to rise, while in Brazil it is stabilized, even if high.

However, Luz draws attention to the fiscal issue that occurs parallel to the process of combating inflation. "But there is no point in monetary policy working to reduce inflation, to have disinflation, if fiscal policy boycotts monetary policy. We are, in Brazil, without any fiscal anchor. The fiscal surplus was demoralized in the second Lula government, when it was created Creative Accounting and shattered the fiscal anchor when former president Dilma ended the primary surplus target", he highlights.

In the subsequent period, the spending ceiling was reestablished as a fiscal anchor, causing inflation to subside and, thus, interest rates could fall. "Now we are again without a fiscal anchor. And what is happening? Prices started to rise back, we had an inflationary peak post-pandemic, we started to have disinflation and we are seeing prices accelerate again", he warns.

The concern, according to Luz, lies in long-term inflation projections in which the expectation is for an increase. "The day after the elections the projection was at 4,94%. Then came the Transition PEC, attacks on fiscal balances, attacks on the Central Bank. Today the 2023 projection is already at 5,96% and rising. And food they are not an island, they are part of inflation as a whole. If inflation rises, food prices also rise", he reinforces.

The economist's objective is to highlight the movement that has been taking place to prevent the field from being identified as responsible for high inflation. "Firstly, we want to draw your attention to the fact that price inflation for producers accumulated in 12 months is 8% lower (according to IIPR of February 03). In these last twelve months, producer prices have fallen. However, in that same period, the IPCA Alimentos accumulated an increase of 2023%. In other words, if food is more expensive it is not because the producer is receiving more, because it is not, he is receiving less. We had a drop in the price of soybeans, of corn, wheat, meat", he details.

Luz remembers that in an inflationary process there is no benefit. "In inflation, no one wins, everyone loses. So, it's not the industry or the supermarket that is generating some kind of problem, it's nothing like that. It's inflation itself. So there's no point in the producers receiving lower prices and the consumer is paying a higher price, that's bad for us", he reinforces.

The expectation of Farsul's Economic Advisory is to quickly define a fiscal anchor. "That's why we eagerly await this measure that the government is calling a fiscal framework. This name, in itself, already reflects a loose commitment to anchoring public finances. Because we don't need a framework, we need an anchor. The government You don't have to spend more than you earn and generate debt for others to pay and generate inflation in the short term. And if the government does not have fiscal balance, inflation will return and food prices will increase", he highlights.

The economist's intention is to anticipate the consequences of current measures and avoid the search for the inflationary villain. "There is no point in asking whether the harvest was good or not or blaming exports, as happened in Argentina. We are worried because Brazil is lax on fiscal issues, we are without an anchor, inflation projections keep rising. If the government If you don't organize the fiscal system, inflation will rise, prices will rise and then they will point the finger at the producer. There is no point in trying to change the economic books. Leaders must follow science and not the other way around. Having a balanced fiscal system helps in the fight against inflation and food prices will converge", he concluded.