World Cup, Accompanying Influx Of 600,000 Expected To Produce Inflation Spike In Brazil
As "if worrying about unfinished stadiums and overcrowded airports wasn't enough," the upcoming World Cup will give Brazilian policymakers "another headache: an inflation spike," according to Alonso Soto of REUTERS. The arrival of "roughly 600,000 foreign tourists for the month-long tournament that starts in mid-June will likely cause substantial increases in the prices of airline tickets, restaurant meals and hotel rooms." Those three areas account for "about a tenth" of the weighting of Brazil's benchmark Consumer Price Index (IPCA). That could "spell trouble for President Dilma Rousseff" as the inflation rate is already at 6.19%. Estimates as to the "exact impact of the World Cup on consumer prices vary." Sao Paulo-based consultancy Tendencias Chief Economist Juan Jensen said that it "may add .35 percentage points to inflation in June alone." Most economists agree that "any spike will ease after the World Cup ends in July but some officials still worry it could scare consumers and contaminate expectations going forward, giving new impetus to price increases." Luiz Roberto Cunha, an economics professor who advises the government on inflation data, said that "all host countries tend to see rising prices when they host the World Cup." Cunha added that the effects "could feel greater because of already high inflation in Brazil" (REUTERS, 4/21).