One of the big questions facing policy makers and a challenge for Dilma Rousseff is Brazil's red hot employment sector. Unemployment is at record lows of 6% and the informal sector is rapidly shrinking although still close to 50% of total employment. Great news for workers but a complex scenario for a government facing inflation of more than 6%, largely driven by consumer spending.
In recent weeks, I've travelled to Goiânia (Centre-west) and Recife (North-east), which are both enjoying booms. In the case of Recife, the specific story of the huge Suape port with its associated petrochemical industry, dockyards and even wind turbine construction is rippling out into civil construction and logistics and leading to headaches for employers. Goiânia is a tale of the continued commodities upswing with sugar-ethanol reaching deep into the state and threatening to displace soya, together with a construction boom in the still somewhat sleepy capital.
Many company directors are reporting salary rises of more than 20% per annum and demand is far outstripping supply in areas such as information technology, engineering and management, particularly outside the Rio de Janeiro to São Paulo axis. Wage inflation typically lags other inflationary indicators and Brazil seems no exception.
The restraint shown in the minimum salary will help. But there are many signs of over-heating, particularly in the local construction sectors. Next year, the minimum salary is set to increase by 13%, giving employees lots of bargaining power.
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