Foreign exchange leverages consumption along with credit and increased income
Valor Econômico - 11/16/2007
In the first ten months of 2007, Brazilian consumers bought 1.6 million microwave ovens, 2 million cars, and 7 million computers. Compared to last year, these volumes mean increases between 20% and 50%. The domestic market, which for many years had been running on the margin, has reappeared with impressive strength in 2007. Besides the increase of employment, the recovery of the income and vast and cheap credit, the dollar exchange rate below R$ 2 - the villain of the exporting sector - has given an extra push to the economy. This year, the sum of salaries paid to workers until July, measured in US dollars, was 19% higher. The impulse foreign exchange gave to consumption also comes as lower prices, especially in the consumption goods produced with imported parts. In the 2007's accrued (until October), the prices of TV sets, sound systems, and computer products (made with many imported components), surveyed by the Brazilian Institute of Geography and Statistics (IBGE), retreated 6.18%. In the sectors which use local inputs, the opposite trend was seen - a pair of shoes or sandals became 4.81% more expensive, on the average. For José Roberto Mendonça de Barros, managing partner of the MB Associados, the strong growth of the internal demand in 2007 has a peculiar characteristic (which helps to leverage it): it happens in all the income brackets. From the minimum-wage employees to the riches, passing by the middle class, all sectors have gained income and purchase power this year. In 2004, the last year that the country grew at a rate above 5%, the net balance of jobs created in the country was 1.5 million, but 270 thousand job positions with wages above three minimums salaries were closed, a profile that continued in the two following years. This year, the negative balance for positions with salaries above R$ 1 thousand was only 65 thousand until June (for a total of 1.1 million positions opened in the first six months), and, according to Mendonça de Barros, it may be zero until the end of the year or even become positive. "The demand for middle class wage-earners is what makes this year different", evaluates the consultant.