In 2024, inflation in Brazil ended the year at 4.83%, exceeding the target ceiling of 4.5%, mainly due to increases in the prices of food, gasoline, and health plans, which highlighted the need for stricter actions by the Central Bank. The Selic, the basic interest rate, remained at 12.25% per year as the main instrument for controlling inflation, with new increases expected for the beginning of 2025. In the political scenario, the increase in parliamentary amendments expanded Congress’ control over the federal budget, limiting the government’s autonomy. At the same time, the Executive Branch faces challenges in institutional communication, such as combating fake news about the alleged taxation of Pix, amid changes in the monitoring of financial transactions by the Federal Revenue Service.
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Inflation in 2024
Brazilian inflation accelerated to 0.52% in December and closed 2024 with an increase of 4.83%, above the target ceiling of 4.5%. The figures aligned with market analysts’ expectations, who projected 0.54% in December and 4.86% for the year to date. The result was released on Friday (10/01) by the Brazilian Institute of Geography and Statistics (IBGE), based on the Broad National Consumer Price Index (IPCA).
Greatest Impact
The food and beverage group had the greatest impact on the year’s result, with a 7.69% increase over 12 months. The accumulated price increases in the health and personal care (6.09%) and transportation (3.30%) groups were also significant, contributing to the IPCA rise. Together, these three groups accounted for approximately 65% of the inflation in 2024.
More About Inflation
Gasoline was the item with the greatest impact on the IPCA for the second consecutive year, with a cumulative increase of 9.71% in 2024. In second place was health care, whose prices rose 7.87% over 12 months. Dining out was also among the items with the highest price increases last year, accumulating a rise of 5.70%. Coffee followed closely, with a 39.60% price hike throughout the year, marking the fourth most significant impact on inflation in 2024.
Decline in Prices
Airline tickets, on the other hand, experienced price drops that helped lower the index, falling by 22.20% in 2024. Among food items, tomatoes and onions saw significant declines in prices, closing the year with decreases of -25.86% and -35.31%, respectively.
Inflation Target
The inflation target is set at 3% for the year, with a tolerance range of 1.5 points up (4.5%) or down (1.5%). Currently, the Selic (base interest rate) stands at 12.25% per year, with the Central Bank (BC) signaling two additional increases in January and March. The Selic rate remains the BC’s primary tool for containing inflation.
Increase in Amendments
The significant increase in the funds allocated to parliamentary amendments led deputies and senators to direct up to three-quarters of the budgets of certain ministries in President Lula’s (PT) government in 2024. The largest proportion (74%) was recorded in the Ministry of Sports, led by André Fufuca (PP), which received R$1.3 billion in allocations from Congress. The data includes funds for both operating costs and investments that were committed within the same year. The Ministry of Tourism, led by Celso Sabino (União-PA), another centrão nominee, ranked second, with 69%.
Restriction of Autonomy
The data indicates that, beyond restricting the government’s autonomy, Congress’ budgetary control has rendered federal agencies increasingly reliant on political appointments. Of the total discretionary federal funds, which amounted to R$230.1 billion in commitments in 2024, approximately 19.5% were directed via parliamentary amendments—an unprecedented percentage. The prominence of parliamentary appointments has surged since 2020. In 2019, before the growth of this model under Jair Bolsonaro’s (PL) government, parliamentary allocations accounted for less than 8% of the discretionary funds committed.
Fake News
President Lula (PT) met on Monday (13/01) with the newly appointed minister of the Secretariat of Social Communication, Sidônio Palmeira. The Secretary of Institutional Communication, Laércio Portela, also participated. The meeting comes as the government works to dispel a wave of fake news regarding alleged Pix taxation. These rumors emerged following a normative instruction from the Federal Revenue Service, which mandates reporting of financial transactions exceeding R$5,000 per month for individuals. This regulation applies not only to Pix transactions but also to other financial operations, including TEDs, withdrawals, and deposits. Sidônio Palmeira will replace Paulo Pimenta.
Analysis:
In 2024, three intertwined issues defined Brazil’s political and economic landscape: inflation exceeding the target, Congress consolidating control over the federal budget, and challenges in institutional communication faced by the Lula administration. These factors underscore structural complexities that shape governance and economic strategies in the country.
Inflation ended the year at 4.83%, surpassing the 4.5% target ceiling, driven by rising prices in essential sectors such as food, transportation, and healthcare. Gasoline and health insurance were among the most significant contributors, reflecting both external dependencies on commodities and internal policy impacts. While the Selic rate remained at 12.25%, its effectiveness as a tool to curb inflation was limited by the multifaceted nature of inflationary pressures, highlighting the need for broader, coordinated measures.
The growing influence of Congress over budgetary decisions marked another pivotal development. With up to 74% of discretionary resources in some ministries allocated through parliamentary amendments, the Executive Branch’s dependence on legislative coalitions, particularly the centrão, has deepened. This dynamic, though crucial for political stability, restricts the government’s autonomy and impairs its capacity to implement policies effectively. Coupled with challenges in countering misinformation, such as the spread of fake news about Pix taxation, these issues illustrate the administration’s ongoing struggle to maintain credibility and foster trust in a polarized environment.
