Brazilian economics

August 12, 2023 • 5 min


In today's post, I will talk about some economic aspects that are considered standards by us Brazilians, but for other countries are not common. Things like having a volatile currency, extremely easy access to credit or absurd import tariffs. There are huge differences between what we experience here, but we are so used to it that we don't even notice some of them in our day-to-day activities. These economic factors cause a shock in foreigners (especially from richer countries with a more stable economy) when they come to visit Brazil. So, I thought it would be interesting to talk about some of them. I will try to find someone from another country to talk about their perspective on the same topics…

Volatile currency

In Brazil, everyone is adapted to an economic scenario where our currency, the Real, is appreciated or unappreciated by large amounts really fast. We basically have inflation in our DNA here and treat it like it's part of our country's culture. This reflects how unstable our economic structure is. The volatility is so high that older people are already used to currency change. For example, someone born in 1942 (currently 83 years old) used 8 different currencies. That's insane. It’s really a significant achievement for Brazil that Real has been circulating for so long (since 94).

I would love to hear from an American citizen about his take on this. They have an experience that's almost the complete opposite of what we have here. Dollar has been around since 1792 with the Coinage Act and they don't need to convert it all the time. Also, the historical inflation rates there are orders of magnitude lower than ours.

Easy access to credit

One time, a friend of mine did a presentation about how different the credit system from Brazil is than the credit system from the US. In his talk, he explained that there are companies in America that are specialized in receiving installments from purchases made in other stores using the buy now pay later model. Companies like Affirm, Afterpay, and Klarna exist just to manage recurrent payments.

From a Brazilian’s perspective, that’s ridiculous…

Let's imagine that you want to start a candle store here in Brazil. You would buy all the candles, create great marketing campaigns and hire a good team. If you can't allow your customer to pay in 12 interest-free installments, you shouldn't even think about doing it. The problem is that every competitor of yours is already offering that. That combined with the classic thought: “It doesn't matter what the total value will be, what matters is if I can pay it monthly” will make you customers buy from other stores or from online marketplaces like Amazon or Mercado Livre.

Another factor that correlates to this is that it is really easy to get a credit card with a decent limit. If you have a bank account, you probably can apply for a credit card and the bank will give it to you.

Just for curiosity, there's something called crediário in Brazil. Google tells me the translation would be something like an installment plan, but that's not exactly what it means. Crediário is digital now, but for a long time, the physical one was really popular. It's basically a contract where you assume that you will pay a monthly bill to the store you bought an item.

Protectionism and high import tariffs

It's really interesting to see some people shocked on Twitter (or X, I guess) about how some sectors like technology have huge taxes. This is another thing that we are already used to and developed some ways to buy it a little bit cheaper, even though it will still be more expensive because of the costs to get the product.

For people that live in the southern part of Brazil, it's common to travel to Paraguay, Argentina, Chile, or Uruguay just to buy tech products (e.g. MacBooks, iPhones, video games) there, where the taxes are lower. There are even travel companies that offer this trip.

Another option is to buy it directly from the US and use some company (e.g. Grabr) as the intermediate. I've done it multiple times. The crazy part is that you will pay the product price, a fee for the person who's going to bring it to Brazil, a Grabr fee, a payment processor fee, and the American tax fee, and all of that will be significantly cheaper than buying it in Brazil.

Welcome to the jungle!

Thanks to Abdul Haidar for reading drafts of this and helping with the ideas.