Brazils Protests Linked to High Youth Unemployment

CEIC Brazil Data Talk: Rising transport costs, perceived government corruption and extravagant public expenditures have triggered widespread unrest across major Brazilian cities. While the modest rise in bus fares in So Paulo has served as the proverbial final straw, increasing dissatisfaction over the direction of the state and its finances which has long plagued public debate. At first glance, Brazils public debt statistics depict the recent administrations continued success in managing its finances. Public debt has hovered between 35-39% of gross domestic product (GDP) since mid-2011 to mid-2013; this ratio was as high as 61.74% during September 2002. Arguably, the protest over rising bus fares points toward greater dissatisfaction over the state of Brazils public services. According to the last Consumer Expenditure Survey held during 2008-2009, public transport, health and education expenditures have increased by a compound average of 5.72%, 6.89% and 1.33% respectively during 2002-2008. Combined, transport, healthcare and education accounted for approximately 10.57% of overall family expenditure as of 2008. A closer look at Brazils inflation statistics provides further insights into the root of this dissatisfaction. Consumer price inflation (based on the IPCA) has edged dangerously close to the Central Banks target of 4.5% 2% since early 2013 and breached the upper limit of 6.5% during March 2013 (at 6.59%), before hovering around the 6.5% mark as of May 2013. This is largely attributable to rising food and beverage prices (13.52% year on year as of May 2013). The inflation data further reveal that public transport prices rose by a relatively small 2.3% year-on-year in May, though health and education rose by 8.0% and 7.7% respectively. Despite the fanfare over the coming 2014 World Cup, the perception of declining living standards due to rising prices and the relatively poor quality of health and education services has mobilised the population against the extravagant expenditure towards hosting the World Cup. This, along with the relatively high tax collection rate by the government (approximately 26.0% of GDP as of 2011), has raised expectations about the quality of public service provided at present, many of these protestors believe that they may not be getting value from their taxation monies. If the dissatisfaction with the direction of the public finances was the spark that led to the nationwide protests, high youth unemployment has undoubtedly provided a breeding ground for these discontents to fester. While Brazils unemployment rate of 5.8% as of May 2013 is low relative to its regional neighbours (in the United States and Canada it was respectively 7.6% and 7.1% during the same period), unemployment rates have steadily risen since the recent low of 4.6% during December 2012. The relatively low total unemployment rate masks high underlying youth joblessness; the protests in Brazil were reportedly dominated by youths. As of May 2013, the unemployment rate stood at 23.8% for those aged 15 to 17 years old and 13.6% for the 18 to 24 year old age group. Protest hotspots, such as Salvador, have unemployment rates of 24.8% for workers aged 15 to 17 years and 19.0% for 18 to 24 years. In a bid to pacify protestors, a large number of cities, including So Paulo and Rio de Janeiro, froze the proposed hike in public transport fares, indeed partially reducing the fare in certain cities. However, given that urban bus, train, intercity bus, subway and water transport accounts for approximately 3.5% of IPCA, the overall impact of this reduction in inflation is debatable. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Bruno Vasconcelos - CEIC Analyst Back to Blog
2nd July 2013 Brazils Protests Linked to High Youth Unemployment