Opinion, by Michael Royster
RIO DE JANEIRO, BRAZIL – Washington Irving coined the above term in 1836, some years after he created the Headless Horseman. The Curmudgeon finds both of them relevant to Brazil’s current reality, as the U.S. dollar has just headed north against the Brazilian real.
The full phrase from Irving’s short story The Creole Village is: “The almighty dollar, that great object of universal devotion throughout our land, seems to have no genuine devotees in these peculiar villages; and unless some of its missionaries penetrate there, and erect banking houses and other pious shrines, there is no knowing how long the inhabitants may remain in their present state of contented poverty.” If you substitute “Brazil” for “peculiar villages” the phrase sums up quite nicely the last few years in Brazil.
Here, those who earn their daily bread in reais have applauded vigorously their relentless rise against the dollar. They have taken advantage of this rise in several ways, including getting on a plane and flying off to the U.S., where the dollar buys almost everything at prices well below what Brazilian merchants practice.
Another is by importing loads of really cheap goods from China and elsewhere, whose prices have been fixed in dollars. In short, as our featured author put it, Brazilians have been able to “remain in their present state of contented poverty.”
On the other hand, those of us who have income based on U.S. dollars, such as exporters of goods and services, have been singing the blues ever since Lula’s second term began. We have watched our purchasing power drop like a stone, particularly for real estate and automobiles, but also for clothing and meals.
But then, all of a sudden, out of a clear blue sky, came the Headless Horsemen. The leading capitalist nations, Europe, Japan and the United States of America, when faced with economies that are in free fall, have done almost nothing about it — and the lack of leadership has continued to reflect badly upon the world economy, deepening the crisis.
Brazil, which almost didn’t feel the 2008 dip, is going to feel the 2012 double dip much more. Why? The reason is, perhaps, surprising. During the forty years of hyperinflation that preceded 1994’s Plano Real, whenever Brazilians began to feel uneasy about the world economy, they raced to buy the one commodity they knew would always be a rock of stability—the almighty dollar.
To do so now, when the U.S. economy is in tatters and its politicians blithely ignore this fact while maintaining their internecine strife, makes absolutely no sense at all. Notwithstanding the above, during September Brazilians flocked to buy more and more dollars, perhaps because of the tradition, but perhaps more because of the lack of options—the Eurozone is also a disaster area. As the price of the dollar rises, everything in Brazil is going to cost more.
Start with bread, because almost ninety percent of the wheat that goes into bread is imported. End with automobiles, where, in order to protect its own scandalously profitable and booming industry, the government has just slapped a thirty percent surtax on imports from Asia.
Everything else is going to go up as well, including the price of air fares to the U.S. to try to avoid the inevitable inflation here. The almighty dollar will become the scourge of Brazil in 2012 — and you read it here first.
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Michael Royster, aka THE CURMUDGEON first saw Rio forty-plus years ago, moved here thirty-plus years ago, still loves it, notwithstanding being a charter member of the most persecuted minority in (North) America today, the WASPs (google it!)(get over it!)