For years Brazilians have been coping with high prices, like a popular car that costs up to a third more than in Mexico. But this week, the New York Times digs in and tries to understand the crazy prices in Brazil.

The NYT cites inflation, bottlenecks in transport and protectionism as factors influencing the high prices but concludes that the “dysfunctional tax systems” for the high costs of living. Here is a snapshot:

“Shoppers here with a notion of what items cost abroad need to brace themselves when buying a Samsung Galaxy S4 phone: the same model that costs $615 in the United States is nearly double that in Brazil. An even bigger shock awaits parents needing a crib: the cheapest one at Tok & Stok costs over $440, more than six times the price of a similarly made item at Ikea in the United States.

For Brazilians seething with resentment over wasteful spending by the country’s political elite, the high prices they must pay for just about everything — a large cheese pizza can cost almost $30 — only fuel their ire.

Brazil’s street protests grew out of a popular campaign against bus fare increases. Residents of São Paulo and Rio de Janeiro spend a much larger share of their salaries to ride the bus than residents of New York or Paris. Yet the price of transportation is just one example of the struggles that many Brazilians face in making ends meet, economists say.

Inflation stands at about 6.4 percent, with many in the middle class complaining that they are bearing the brunt of price increases. 

“Brazil is on the verge of recession now that the commodities boom is over,” said the Drunkeynesian

Brazil’s sky-high costs can be attributed to an array of factors, including transportation bottlenecks that make it expensive to get products to consumers, protectionist policies that shield Brazilian manufacturers from competition and a legacy of consumers somewhat inured to relatively high inflation, which remains far below the 2,477 percent reached in 1993, before a drastic restructuring of the economy.

But economists say much of the blame for the stunningly high prices can be placed on a dysfunctional tax system that prioritizes consumption taxes, which are relatively easy to collect, over income taxes.

Alexandre Versignassi, a writer who specializes in deciphering Brazil’s tax code, said companies were grappling with 88 federal, state and municipal taxes, a number of which are charged directly to consumers. Keeping accountants on their toes, the Brazilian authorities issue an estimated 46 new tax rules every day, he said.

Making matters worse for many poor and middle-class Brazilians, loopholes enable the rich to avoid taxation on much of their income; wealthy investors, for instance, can avoid taxes on dividend income, and partners in private companies are taxed at a much lower rate than many regular employees.”

Full Article: NYT

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One Response to Brazil: Home of the $30 Cheese Pizza

  1. American in Rio says:

    As an American who has lived in Rio the past 9 years, the ever increasing cost of living in Brazil never ceases to amaze me.

    The NYT article had it partly right but there were some errors. I’ve purchased 2 new cars this year. A Chevrolet S-10 pick up that is also sold in Mexico and a Kia Cerato (Forte in the US) which is also sold in the US. The Chevrolet, made in Brazil, cost 100% more than the Mexican made model, not 1/3 higher as the NYT would lead you to believe. The Kia, made for both markets in Korea, cost 120% more than the US version even though the US version has a larger engine and more equipment.

    I believe the article mentioned the cost of Levi jeans. I purchase them online from the Levis.com USA site. Normally pay, when on sale, $30-40 USD. The same in Brazil, never on sale, cost something like 4 times more.

    Lastly, I was fortunate enough to have had a 2 week vacation in Germany in June and then a weekend in Ouro Preto in July. Amazingly, hotels were better and cheaper in Germany as was the food. I won’t comment on the differences in infrastructure other than to say that I would not recommend the BR-040 highway to anyone. It’s truly pathetic especially considering it connects two of Brazil’s most important cities.
    The roads remind me of Mexico 50 years ago.

    As to the cost of pizza, I won’t even go there…

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