The distorted formation of administered prices in recent Brazilian experience
This article discusses the necessity for microeconomic price adjustment in Brazil at the end of the first government Dilma Rousseff (2011-14). The price control in Brazil is done by different means, by the three levels of government, federal, state and municipal. It includes services regulated by agencies in infrastructure sectors such as electricity, fixed telephony and road tolls; the direct control of state enterprises prices, as in the case of petroleum products, or through specific legislation as in health services. However, the different levels of government eventually distort prices through arbitrary measures, given short-term political objectives, disregarding the institutions designed to define them. The emphasis of the paper is to evaluate the evolution of these prices during the last presidential term and the difficulty of maintaining realistic administered prices in such a context.
JEL Classification: L11; L38; L94; L96; L97; L98.
Keywords: production pricing market structure public policy electric utilities telecommunications utilities government policy