Food Prices Drop in Brazil
Customers in a supermarket in Rio de Janeiro, Brazil, are experiencing a pleasant surprise with the recent price changes. They are now paying significantly less for essential items like coffee and meat. This trend is not limited to a specific store or location, as a recent survey by the Brazilian Department of Statistics and Socio-Economic Studies (Dieese) has confirmed that food prices in August will be cheaper compared to July in the 27 regional state capitals of Brazil.
Customs and Agricultural Cycles
The decline in prices can be attributed to natural cycles typical of agriculture, according to Leandro Dias from the agricultural trading platform Agroderi in Sao Paulo, Brazil. "Coffee had a strong harvest that increased the offer and lowered the prices. With beef, the cattle cycle is in a phase with many cattle that are ready for slaughter, which the domestic market now feels," he explained. The US tariffs for Brazilian imports also play a role, as the 50% tariff set by US President Donald Trump for most Brazilian products has caused inflation at home and slowed competitiveness abroad.
Impact of US Tariffs
As a result of the tariffs, US consumers are facing rising food prices, while the prices for the same goods have fallen in the manufacturing countries. Economists argue that the tariffs change the supply and demand in Brazil, with products intended for the US market remaining in Brazil and affecting the domestic market. The beef prices, in particular, will adapt more slowly but are currently trending downward.
Political Consequences
The US tariffs are associated with the trial against former President Jair Bolsonaro, which was raised by the Brazilian Supreme Court. The Brazilian government insists that its judiciary is independent, while the country’s left-wing president, Luiz Inacio Lula da Silva, criticized the tariffs as unfair. Brazil’s exports to the United States have reached a record high, with a trade surplus of $2.3 billion in favor of the US.
Economic Risks
A similar trend of falling food prices is developing in Mexico, where tomatoes have become considerably cheaper due to high production and decreased exports to the US. However, economists warn that the prospects may not be so bright in the long run. If producers lose access to important markets like the US, they may no longer have an incentive to invest, leading to lower productivity, quality losses, and potentially shrinking production. This could ultimately lead to higher prices, detrimental to local consumers in Brazil and beyond.
