The most severe drought in the country’s history will weigh heavily on Brazilians’ pockets

In this scenario, Brazilians should prepare their wallets, as several sectors of the economy will feel the impact of the drought. The National Electric Energy Agency (Aneel) has already determined the activation of the red flag level 1 on energy bills, due to the forecast of below-average rainfall in hydroelectric reservoirs. As a result, there will be an extra charge of R$4.46 for every 100 kWh consumed.

According to the president of the São Paulo Economists Union (SINDECON-SP) Carlos Eduardo Oliveira, the increase in energy prices can affect other sectors of the economy.

“The increase in the price of electricity impacts production costs, putting even more pressure on inflation. And this harms competitiveness, since you have to charge higher prices, especially (in comparison) with imported products, and ends up having a major impact on Brazilian industry. The increase in the electricity bill ends up impacting household purchases, because you have to spend a little more to buy the same products.”

The most recent survey by the IBGE shows that the Broad Consumer Price Index (IPCA) accumulated an increase of 4.5% in the last 12 months ending in July. This value is considered the upper limit of the target pursued by the Central Bank. However, according to economist Carlos Eduardo, the inflation indicator could increase even further, since food production has a strong influence on the IPCA.

“If (the drought) persists for a long time, it will affect agricultural production, especially food items, and will also end up affecting the index as a whole, that is, it will raise the price of food, as we have seen in recent times.”

Economist Carlos Eduardo explains how the lack of rain can harm food production.

“This lack of rain impacts products that depend on irrigation, such as beans, corn, and vegetables, which have a strong impact. In addition to the scarcity of these products, it also ends up impacting meat production, because cattle and poultry need water to irrigate pastures and produce grains for food, and this ends up having a major impact on the food issue.”

For economist Newton Marques, member of the Regional Economic Council of the Federal District (Corecon-DF), despite the current scenario, there is no risk of shortages.

“There is always this concern, but as the agricultural cycle is not that big, except in the case of livestock, if there is a climate change, with rain, this could bring about a change in the medium term.”

Drought scenario

According to the Cemaden monitoring bulletin, 3,978 municipalities are experiencing some degree of drought, with 201 experiencing extreme drought. The agency predicts that the number will rise to 4,583 municipalities, with 232 experiencing severe drought in the September bulletin.

According to Cemaden researcher, Dr. Ana Paula Cunha, unlike other years, when the drought occurred in a localized manner in some regions, this year the phenomenon covers more areas of the national territory.

“In 2020, we had a very extensive drought in the Central-West region of the country. In 2012 to 2017, we had a very extensive drought in the Semiarid region and, in 2015 to 2016, in much of the Central-North region of the country. However, this one in 2023-2024 is the first that covers the entire country from the North to the Southeast.”

The survey takes into account not only the lack of rainfall, but also soil moisture and vegetation conditions. According to the Cemaden researcher, the situation could get even worse with the predicted delay in the start of the rainy season.

“Regarding this month of September, the expectation is that it may rain at the end of the month, in the Center-South of the country. However, the forecast for the next three months, for the Center-North of the country — which includes Goiás, Tocantins, Mato Grosso, Pará, Amazonas, Acre — (is that) the rains will still be below expectations.”

According to Cemaden, many regions of the country have been without rain for more than 120 consecutive days, which further aggravates the situation of agricultural production, especially third corn and bean harvests, in addition to the quality of pastures for extensive livestock farming.

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More than 1,700 cities are affected by severe or extreme drought in Brazil