It sounds funny if you never heard about it but here is the gist of it: Brazilians think that the main reason their products are so expensive is that big corporations are exploiting them.
Here is one example: autos sold in Brazil are among the most expensive in the world. You can compare them to similar cars sold in richer or poorer countries and the difference is shocking (for instance, the cheapest Civic made in Brazil costs R$ 86.750,00 – or more than US$ 55k).
You read their news and opinion columns and the idea is always that even though Brazil has ‘some inneficiences’ the bigger problem is just that those auto companies are ‘too greedy’. Even pieces that try to put things into perspective still miss very basic points on why this idea that greed is to blaime is absurd (even the title itself is silly: “price goes beyond profits”).
But let’s play along. Let’s imagine that yes, auto producers in Brazil are especially greedy and that all of them want to milk consumers to the last penny (wonder where in the world that is not true but let’s pretend this is somehow different in Brazil just for kicks). So let’s imagine a producer A, who discovers that he can charge X for the most basic car so his profit is maximized.
Later producer B joins that market (Brazil has no monopoly of autos in any way – companies from the US, italy, France and Japan are all present) and by definition that producer lags behind in market share. Like every other competition situation in the world, the way producer B becomes competitive is by lowering prices. That happens every time you add more and more producers and what you get in the end is the lowest possible price for each car – otherwise, your car just won’t sell.
Of course we could especulate about collusion and other similar schemes that try to workaround competition. But the question then is why that kind of illegal arrangement would be sustainable if that market is still open for new brands? It would also be very difficult to coordinate and execute (in secrecy) such a large conspiracy in such a huge and diverse marketplace.
Finally, the last end of the puzzle would be: even if these companies are so smart, deceitful and efficient in arranging this grand scheme of super maximization of profits, why is that only happening in Brazil? I mean, you go to any other country around Brazil and prices are much lower. It is very unlikely that this wonderful and lucrative conspiracy could not be replicated anywhere else by these same players, right?
At the end of the day, people in Brazil just don’t understand the cost of all their taxes and bureaucracy. It is not just a matter of adding up all the percentages and coming up to this magic number called ‘Cost Brazil’. You have to remember all the extra operational costs companies have to deal with in that country: all the stupid labor laws; the incredibly slow and costly legal system; high tarrifs; the insane regulations on land use; the always present political instability that keeps the country 2 steps behind turning into Venezuela, etc, etc.
So, even though it is not easy to calculate this magic multiplier it is very easy to understand why it exists and why greed is not the problem.