What next for Brazilian wage inflation?

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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I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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