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September 13, 2006 10:09 pm

Low food costs leave most Brazilians unconcerned

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If ordinary Brazilians appear to be unconcerned about growth, it is probably because what they are experiencing, despite the sluggishness of the overall economy, feels very much like the kind of growth Goldman Sachs had in mind when it coined the word BRICs.

The export boom and the resulting strong currency have kept food prices low. This is especially important for the poor, who spend up to two-thirds of their income on food. The poorest have also benefited from the expansion of income transfer programmes under the present government. These are expected to reach more than 11m families by the end of 2006, affecting the lives of more than 50m people.

It is not only the poorest who are consuming more. The government has introduced new forms of credit, with especially strong growth in payroll-linked loans, in which lenders may deduct payments from the monthly pay cheques of public-sector workers and pensioners. Such credit grew from R$11bn at the end of the first quarter of 2004 to R$40bn at the end of the second quarter this year.

It is little surprise, then, that most voters see little reason to replace President Luiz Inácio Lula da Silva at next month’s elections. What remains to be seen is whether the next government will deliver policies to make growth permanent and to justify Brazil’s place among the BRICs.

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