President Dilma said gas prices can NOT vary with the dollar because brazilian workers earn in Reais, not in dollars. And she is, supposedly, an economist.
Dilma, there are tradable and non-tradable goods in this vast world we live. Tradable goods are those with smaller transport costs and hence can be sold / bought abroad. Their prices have to vary with the dollar. Why? Because if the price rises in dollars and it does not change in local currency, domestic consumption does not react to shifts in relative scarcity (and thus does not adjust downwards to the new reality), and domestic supply has no incentive to adjust quantities produced upwards, precisely when it should.
It generates inefficiency, Dilma.
I am so old now that I learned this: heterodox economists can NOT understand what inefficiency means. They can NOT understand welfare economics. That is why they think subsidies are always good. Their brains can process only quantities. Inefficiency is too hard for them to understand.
It is lamentable, to say the least.