The price is wrong

FROM $30 CHEESE pizzas in São Paulo to $250-a-night windowless, smelly hotel rooms in Rio, the lasting memory from a visit to Brazil in recent years has been shock at how expensive it is. When Lula came to office in 2003 a dollar bought 3.5 reais; by mid-2011 it bought just 1.53 reais, barely a third of the 2003 figure in real terms, because inflation in Brazil during the period was much higher than in the United States. Since then the exchange rate has fallen to 2.3 reais to the dollar, but that has undone little more than half the past decade’s gains. In any case, the causes of Brazil’s competitiveness problem go far deeper than the exchange rate. The strong real actually helped keep prices down by making imports cheaper. It did, however, give foreign visitors a chance to experience something the locals know so well that they have a name for it: the custo Brasil (Brazil cost).