Even with a real increase in the minimum wage, Brazilian purchasing power will remain stagnant until 2026, study shows

The minimum wage in Brazil became R$1,518.00 in 2025, a value R$106 higher than in 2024, and corresponding to an adjustment of 7.5%.

But, with the dollar soaring and the prospect of continued rise in food prices this year, there should be no increase in Brazilians’ purchasing power in relation to the price of the basic food basket, according to a study by consultancy firm LCA 4intelligence.

And the scenario will not change in 2026, when Brazilians’ purchasing power will remain stagnant and below pre-pandemic levels.

This helps explain Brazilians’ bad mood with the economy, even in a scenario of unemployment at a historic low and rising incomes, analysts say.

Last Tuesday (31/12), a Datafolha survey showed that 61% of Brazilians believe that the country’s economy is on the wrong path, compared to 32% who consider the economic trajectory to be positive and 6% who were unable to respond.

The situation also poses a challenge to the re-election project of President Luiz Inácio Lula da Silva (PT) in 2026, in an inflationary scenario that has penalized other representatives at the polls — in countries such as the United States, United Kingdom, South Korea, Portugal and Uruguay , opposition parties of different ideologies came to power or won a majority in Congress last year.

When asked to comment on the trend of stagnation in purchasing power shown by the study, the Ministry of Finance did not respond until the publication of this report.

To carry out the study, economist Bruno Imaizumi, from LCA 4intelligence, used the historical series of the value of the basic food basket in the city of São Paulo produced by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese) and the current minimum wage.

He then projected the two series ahead, based on the LCA estimate for home food inflation in 2025 and 2026 and for the minimum wage adjustment according to the new rule.

Since 2023, the minimum wage is corrected by the sum of inflation measured by the National Consumer Price Index (INPC) in 12 months until November and the growth of the Gross Domestic Product (GDP) of two previous years.

The difference is that now there is an adjustment ceiling of 2.5% above inflation, in order to adapt the growth of the minimum wage to the public spending limits defined by the new fiscal framework.

Since 1998, the beginning of the historical series of the Dieese basic food basket in São Paulo, until 2010, there was a gain in Brazilian purchasing power, the data shows.

Going from a little more than one basic food basket per minimum wage to 2.2 basic food baskets in January 2010.

In the period between 2010 and 2019, the best time for Brazilian purchasing power, the minimum wage bought an average of 2.1 basic food baskets.

“What the study shows is that we lost purchasing power from 2020 onwards, when the pandemic hit and food prices became very expensive”, notes Imaizumi.

From 2022 onwards, there will be a war between Russia and Ukraine, with a strong impact on the global price of grains, in addition to a series of increasingly extreme weather episodes, which reduce the supply of food, raising prices worldwide.

As a result, the purchasing power of the minimum wage fell to 1.5 basic baskets in April 2022.

Since then, it has recovered slightly, to 1.7 in November 2024, but without returning to its pre-pandemic level.

“Price levels have remained very high and, looking at our projections, which extend purchasing power metrics forward, we see that there is no recovery [nos próximos dois anos]”, says the LCA economist.

“We will not return to levels [de poder de compra] pre-pandemic, so Brazilians still feel injured. He cannot buy the same things he did before the pandemic, because price levels remain too high.”

Imaizumi notes that, even considering the old minimum wage adjustment calculation rule, the scenario would change little.

“What can help to achieve a slightly more decisive recovery in purchasing power is an appreciation of the real”, assesses the economist.

“To achieve this, the government will need to show that it is committed to the issue of fiscal adjustment, because the trajectory of Brazilian public accounts in the medium and long term is worrying, which affects expectations of investment, consumption and long-term growth in the country. ”

The analyst recalls that, in 2024, food inflation was well above the rise in inflation in general as measured by the Broad National Consumer Price Index (IPCA).

This was largely due to excessive rain, drought and fires that affected harvests not only in Brazil, but also in other large oil-producing countries. commodities agricultural.

For 2025 and 2026, Imaizumi expects that IPCA and food inflation will have closer variations.

“But food prices will remain high”, predicts the economist.

“As much as we have [em 2025] With the prospect of a harvest close to the 2023 record, the devalued real encourages exports, which reduces the supply of products on the domestic market.”

Furthermore, he says, the devalued real also affects the value of commodities traded in dollars on the international market.

And unanchored inflation expectations amid fiscal concerns also end up influencing food inflation, recalls Imaizumi.

For the economist, the persistence of prices at a high level after the pandemic may be one of the reasons that have led to what is called in political analysis the “pendulum effect”, or the tendency for the opposition to win in recent elections around the world.

“The president of a certain ideology is elected, but is unable to recover purchasing power or make the economy grow in a robust and sustainable manner, so he is unable to be re-elected, even with the public machine operating”, he states.

Creomar de Souza, political scientist and executive director of political risk consultancy Dharma Politics, assesses that, if projections of stagnation in purchasing power in the second half of Lula’s term are confirmed, he could indeed face difficulties in the 2026 elections .

“There’s a phrase that says: ‘If the refrigerator is full, the vote is for the government. If it is empty, the vote is for the opposition’. So the big challenge for the Lula administration in the current situation is to convince people that the economy is working”, says Souza.

“And this is not just a communication challenge. Unemployment is falling, wages are rising, but people are not feeling it in the market. That’s the point.”

Souza points out, however, that the causes of the problem may be beyond the government’s ability to remedy it and highlights that inflation recently influenced the election in the United States, won by Donald Trump.

“In other words, it is a global problem — prices have not returned to what they were before the pandemic here, in Europe, in the United States, everywhere”, says the political scientist.

Souza also notes that the economy is not the only factor that helps explain the negative assessment that part of the population makes of the Lula government — in the most recent Datafolha, 35% say they approve of the PT government, while another 34% disapprove, and 29% say management as regular.

The country remains deeply fractured politically, says the analyst.

“An important part of society that doesn’t like Lula, if the government manages to rain manna from the sky, will continue to dislike Lula”, says Souza.

“This creates difficulties for the country as a whole, because it erodes consensus. There is a difficulty in translating positive data into the perception of a large number of voters.”

Faced with this dilemma, the government has two possible paths towards the end of its mandate, in Souza’s view: trying to resolve the fiscal challenge that has generated a crisis of confidence in the markets, impacting the exchange rate and inflation expectations, or “throwing more firewood in the boiler” and accelerate spending at the end of the term with a view to re-election — as former president Jair Bolsonaro (PL) tried and failed.

“The dilemma for the Lula government is to curb negative expectations, and this involves the government being more homogeneous, having more consensus and having very clear signals about what it wants to do”, says Souza.

Recalling the crisis of confidence during the government of Dilma Rousseff (PT), he states that the recent past shows that it is not a good idea to go to war against market forces.

“Congress and political forces in Brasília smell something going wrong very quickly — weakness, lack of governance or lack of consensus,” he says.

“As this smell is felt, political forces will try to make the most of it, so, for each measure that the government needs to approve, the price will become more expensive. And a government that spends a lot of resources on the negotiation process is deprived of resources to address other issues that matter.”