By TOM MURPHY

SÃO PAULO—Inflation, which wreaked havoc in Brazil during the 1980s, is re-emerging as a concern amid rising wholesale and food prices, even as economic growth falters.

Until recently, Latin America's biggest economy was growing robustly for a decade, but Brazil's leaders seemed to emphasize growth over taming the high inflation it unleashed. Now, quickening inflation and slowing growth is leading some economists to question whether the economy is running out of steam at the same time that the U.S. and euro-zone economies are weighing on global growth.

In Brazil, quickening inflation is particularly worrisome because food prices are rising at a time of year when they normally remain stable, or decline.

Monthly inflation data released Monday by the private Getulio Vargas Foundation, a leading economics research university, showed its IGP-M index rising a worrisome 1.34% in July, twice June's rate. July's 12-month rate was 6.67%. The foundation's wholesale-price-focused index is a harbinger of retail prices to come.

At the same time, Brazil's economy is likely to grow less than 2% this year, according to a weekly survey of economists consulted by the Brazilian Central Bank, down from an already weak 2.7% in 2011.

The combination of slow growth and rising prices will leave Brazilians worse off in the long run, said Paulo Faria-Tavares, managing partner of São Paulo-based PTX Lending Consultants. "But the government seems obsessed with growth, not inflation," he said.

To push faltering growth, Brazil's government has tinkered with tax cuts on durable goods and reductions in interest rates over the past several months. But growth prospects are poorer now than at the beginning of the year, when economists predicted GDP growth of about 3.5%.

Meanwhile, inflation has turned more worrisome. The official IPCA-15 inflation index, released last week, showed the 12-month inflation rate through mid-July increased to 5.24% from the previous 5.0%.

Food prices, which appear to be driving the increase, don't normally rise at this time of year in Brazil.

"May through July inflation is traditionally low in Brazil as the [southern hemisphere] autumn harvest works its way through the economy," said Daniel Moreli Rocha, chief Brazil strategist for Banco Indusval and Partners, a São Paulo-based investment bank. "But food prices are showing a persistent rise, even higher than average inflation. The reason is the heat wave in the U.S., which is sending international grain and oilseed prices higher. Call it globalization. Our food prices are rising because of U.S. weather conditions."

With Brazilian unemployment at historic lows of less than 6.0%, wage inflation is also a continuing problem, Mr. Moreli Rocha said.

Economists consulted by the Brazilian Central Bank, in a weekly survey also released Monday, raised their 2012 inflation forecast to 4.98% from a previous 4.92%, which is above the central bank's 4.5% target for the next two years. It was the third weekly increase in a row for the inflation forecast. Economists in the survey maintained their forecast of inflation at 5.5% for the next two years.

In a conference call with reporters last week, Central Bank President Alexandre Tombini reiterated his institution's commitment to its target. "We are confident that we are on track to bring inflation towards our inflation targets," he said, declining to forecast interest rates.

Brazil's Selic benchmark interest rate is currently at an historic low of 8.0%, down from a 2011 peak of 12.5% in August 2011. Most economists expect one more half-point reduction in the rate to 7.5% by the end of this year.

But inflationary pressures will likely force the central bank to reverse course at some point in 2013, the economists in the survey say. In this week's central bank survey, economists predicted a 2013 year-end base rate of 8.5%.

From: http://online.wsj.com/article/SB10000872396390444405804577559463415529678.html

Originally posted by Labyras I think we'll live to see the day that a bag of chips costs R$10.

yup, and we'll probably have the new-new-Real by that time too. Whoever has CDBs or other cash investments will see the value chipped away with each major change that in the end, the original investment will be worth 50% as much.

The only hedge that I know of that protects against inflation and politicians is real estate.

Originally posted by GGTrek You forgot either a big basket of commodities or equity shares in non financial companies which are usually invested in real assets

Or gold bars. Gotta love having 8 bars of 1kg of gold in your bedroom