The Financial Times writes: 

“All along Avenida Paulista (São Paulo’s main business thoroughfare) this month, stickers with the words “On Strike” have been plastered on the banks, post offices and other government offices in the area. Strike season – the months before the new year when workers across Brazil agitate for higher pay – is upon Latin America’s largest economy.

But economists are questioning how long salaries can continue to rise in an economy in which productivity, particularly in manufacturing, is falling behind real wage increases. Declines in productivity make Brazilian goods less competitive, particularly against imports from countries such as China.

“Unit labour costs are going up very, very sharply in Brazil, especially in manufacturing,” said Paulo Vieira da Cunha, head of emerging markets research at Tandem Global Partners. 
According to a report by Credit Suisse, real wages in the manufacturing sector rose 3.6 per cent in the 12 months to July compared to a 0.1 per cent rise in productivity during the same period.
The tendency to expect salary increases that are not linked to productivity is a byproduct of Brazil’s past, when runaway prices meant salaries were automatically indexed to the inflation rate.”

Stagflation, anyone? 

Original article here

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