São Paulo – The governments of Arab countries, as is the case with other emerging nations, have started the year with a complex mission: fighting inflation. As is the case with Brazil, the price indices are on the rise and threatening stability of the economy, they are also threatening in the Middle East and North Africa and, in fact, are part of the reasons for dissatisfaction and popular protests. Adriano Gomes, Finance professor at the Marketing and Advertising Higher School (ESPM) and consultant at Méthode Consultoria Empresarial, mentions the impoverishment of populations and higher food prices as factors that, together with political vectors, have fuelled protests in Egypt.
The Consumer Price Index in Egypt rose 1.02% in January as against December, reaching an annual rate of 10.79%, as against 10.28% in December, according to figures disclosed by the Central Bank in the country. According to the Central Intelligence Agency (CIA), last year inflation in the Arab world ranged from 1.1% in Qatar to 12.8% in Egypt. The global inflationary movement has also started being felt in countries, said Luciano D’Agostini, Economic Development doctor at the Federal University of Paraná (UFPR), who is post graduated in Finance from the Brazilian Institute of Post Graduate and Extension Studies (IBPEX) under Uninter group.
Some Arab countries, mainly those that have income from oil, subsidise the prices of food, pointed out the secretary general at the Arab Brazilian Chamber, Michel Alaby, helping fight inflation. "Some governments buy food on the international market and sell it to their populations for a lower price. Part of the inflation on food, then, is absorbed by the government," explained D’Agostini.
The higher price of commodities, including food, is one of the backdrops for global inflation. According to Gomes, food prices rose due to factors like heated demand in emerging nations – especially China – boosted by greater buying power and by the climate, which resulted in crop problems in several producer countries, among them Brazil, Uruguay and Argentina, last year. "The main commodities climbed to the same prices as in 2008," said Gomes. The depreciated dollar, due to the weaker North American economy, is causing investors to seek papers connected to commodities, boosting their prices on the futures market.
Spearheading the problem, however, is the monetary policy of the United States, recalled D’Agostini. To try to recover from the crisis, the United States lowered their interest rates from almost 6% a year to 0.25%. With this, investors run to countries with more interest rates and acceptable risk, especially emerging nations. Gross credit, then, boosted inflation. The UFPR doctor recalls that never in the history of emerging nations had they lived this phase of "credit economies".
According to D’Agostini, the countries that suffer most with this are the nations that do not have efficient monetary systems, with political instability (as this does not favour efficient monetary measures) and with the absence of government programs turned to the situation. The consultant recalls, however, that what is currently seen worldwide are economies with inflation and not hyperinflation, a phenomenon in which the state of the economy is already chaotic and there is further impoverishing the population due to higher prices. In Brazil, recalled D’Agostini, there is greater chance of fighting inflation than in other nations, as the government has great resources for use in the short term, with greater interest rates, higher compulsory loans and fiscal reforms. A global way out would be greater interest rates in the United States, which should not take place in the near future.
*Translated by Mark Ament
