If you're getting a bikini wax in Brazil, you're likely to findthat the cost is rising. And if you're an economic policy maker,that's a problem.

As with more prosaic services ranging from car repair todentistry, the price of waxing is rising faster than mostcomponents of the nation's economy. That's pushing inflation abovethe government's target and may force central bank PresidentAlexandre Tombini to prolong interest-rate increases this year.

Price increases for services, which make up 24.1 percent ofBrazil's benchmark inflation index, outpaced all other categoriesin the past two months, according to data released May 11 by thebank. They rose 8.57 percent in the year through April, the fastestpace in at least 15 years.

“Services will continue to be the main villain of inflation andmay prevent prices from slowing to target next year,” Fernando Fix,chief economist of Votorantim Wealth Management, said in aninterview from Sao Paulo. “Domestic demand is too strong.”

That includes a bikini wax, which in Brazil is often seen as anecessity rather than a luxury, said Elzimar Siqueira, former ownerof a beauty shop and head of administrative affairs at theSyndicate of Women's Beauty and Hairdressing Institutes of Rio deJaneiro.

'Summer All Year' “We have one of the highestdemands for waxing in the world because of our climate,” Siqueirasaid in a telephone interview. “We have summer all year, we'realways wearing bikinis and miniskirts.”

One community listings website in Sao Paulo, Sampa Online, showsmore than 90 waxing establishments.

At the Imaculada Hair and Makeup beauty shop in Brasilia, ownerAlessandra Rita de Arruda Lopes says she's raised the price to 35reais ($21.63) from 30 reais because “all my costs are going up.”The average price of the depilation procedure rose 12.4 percent inthe year through April, the national statistics agency said lastweek.

Consumer prices in Latin America's biggest economy breached thegovernment's 6.5 percent target ceiling in the year through Aprilfor the first time since June 2005. In a bid to cool inflation,policy makers have raised the benchmark Selic rate by 1.25percentage points this year, to 12 percent. Brazil will increaseinterest rates for a “sufficiently prolonged” period of time toensure inflation slows to 4.5 percent next year, Tombini said May11.

Benchmark Rate Analysts covering Brazil expectthe central bank to boost the Selic to 12.5 percent by year-end, asurvey of about 100 economists published this week showed. The realwill end the year at 1.62 per dollar, little changed from 1.6198today.

Some analysts predict a higher rate. “Inflation will continue tomake itself felt,” Paulo Leme, managing director for emergingmarkets at Goldman Sachs Group Inc., said in a telephone interviewfrom Miami. He forecasts the Selic will rise to 13.25 percent atthe end of 2011

Brazil's GDP per capita reached a record $10,813 last year,after the economy grew 7.5 percent, the fastest pace in more thantwo decades. The Finance Ministry predicts growth of 4.5 percent in2011. Mexico, Latin America's second-biggest economy, saw grossdomestic product grow 5.5 percent last year, and central bankGovernor Agustin Carstens on May 12 forecast expansion of 4 percentto 5 percent in 2011.

Labor Market Brazil's growth has helpedincrease demand and drive up prices for services. Also contributingis a tight labor market, which has caused a shortage of workers insome industries and may in turn result in real wage increases incollective bargaining this year and next, said Constantin Jancso,an economic analyst at Sao Paulo-based HSBC Bank Brasil SA.

“Negotiations with metalworkers and bankers begin in the thirdquarter,” Jancso said. “I wouldn't be surprised to see increases of10 percent, which will feed demand a little more.”

Brazil's unemployment rate has remained below 7 percent sinceJune and reached a record low 5.7 percent in December before risingto 6.5 percent in March, according to the national statisticsagency.

The Brazilian economy may generate 3 million government-registered jobs this year after net creation of 2.5 million jobslast year, Labor Minister Carlos Lupi said May 11.

Brazil's Bovespa Index was outpaced by both the MSCI EmergingMarkets Index and the Standard and Poor's 500-stock index in the 12months through April.

Commodity Prices Inflation is accelerating inother emerging and developed economies such as China, India, andthe euro zone, largely spurred by rising commodity prices. Brazil'sinflation is being fueled by more than just commodities, Tombini,47, said yesterday.

Prices of 20 of 41 services monitored by the central bankaccelerated in April from March, led by recreation, parking and carmaintenance. In the year through April, 26 services acceleratedabove the government's target.

Oil changes and car cleaning prices rose 18.25 percent in theyear through April, outpacing the 6.51 percent increase in thebenchmark inflation rate. Hotels and dressmakers increased pricesby 14.03 percent, according to the agency.

Service prices have outpaced benchmark inflation in Brazil sinceMarch 2004, rising at an annual average of 6.45 percent throughFebruary 2011, while the inflation rate averaged 5.32 percent, thereport showed.

Durable Goods The cost of services acceleratedfaster than the other four categories in the inflation report:durable, semi-durable and nondurable goods, and monitored pricessuch as public transport and utilities.

Price increases in Brazil, especially for services, are spurredby a process known as indexation, under which past inflation isused as a benchmark for raising prices again. Brazilian rents, forexample, are annually adjusted based on the wholesale IGP-M index,which rose 11.32 percent last year.

Former President Luiz Inacio Lula da Silva also indexed theminimum wage, which helps determine governmentpension payments. He signed a deal with unions in2006 to boost the wage annually by a percentage adding the previousyear's inflation to economic growth from two years back. In 2012that formula is likely to yield a minimum wage increase of morethan 13 percent.

Higher wages are one reason Brasilia beauty shop ownerAlessandra Lopes is raising all her prices. Meal vouchers,cosmetics, and the cost of “depi rolls,” which are used to spreadthe wax for depilation, are also going up, she said.

“Some clients are coming less frequently for haircuts because ofthe higher price,” Lopes said. “But not for waxing. Brazilian womenmight let their hair grow longer, but they'll never stop gettingwaxed.”

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