Brazil’s Middle Class Going Back to Essentials

By Lise Alves, Contributing Reporter

SÃO PAULO, BRAZIL – In the past decade Brazil witnessed the surge of its middle class, termed ‘C class’ which is defined as a per capita monthly income of between R$320 (US$144) and R$1,120 (US$503). During this time an estimated 35 million have moved up from poverty and entered the middle class and today the C class represents 54 percent of Brazil’s population.

With this growth a sizable new segment of the population who once barely were able to pay their bills started to purchase durable goods and were able to obtain credit. Shopping centers sprawled up in poorer sections of towns and consumption boomed.

Now according to a study by Instituto Data Popular (IDP), perspectives for the near future are not promising. The study’s results shows that 85 percent of Brazilians believe that they will not have the same purchasing power they had in the past.

In addition seventy percent believe that prices will increase even further by the end of the year. According to the IDP this segment of the population, which spent close to R$ 1.17 trillion in 2013, has lost nearly R$73.4 billion in purchasing power due to rising inflation.

In the past twelve months according to the IBGE (Brazilian Statistics Bureau) the IPCA (Consumer Price Index) has accumulated an increase of 6.28%, but many services such as school fees and health plans, now part of the budgets of many middle class households, have been readjusted well above official inflation rates.

Meliane Silva works twice a week cleaning houses in São Paulo. She has two daughters and her husband works part time as a painter. On a good month they can make close to R$1,500. “Last year for the first time my girls tried yogurt,” she says, but adds “This year our bills increased much more than our wages and everything is more expensive.”

Now, after almost a decade and a half of relative economic stability, inflation has become a concern for both Brazil’s government and its population. Brazil’s middle class, which prospered and grew significantly under ex-President Lula’s administration, has been perhaps the class which has suffered the most with the rising costs.

Nonetheless, says Paulo Feldmann, economics professor at FEA-USP, unemployment rates are low and the economy is working. According to Feldmann it is unlikely that many will fall back below poverty lines again. “What is occurring is that the middle class is giving up the superfluous, non-essential items,” he adds.

According to Feldmann the government seems to be aware of the inflationary pressure and is taking measures to keep inflation rates from rising too much. “The government is keeping a close tab on inflation and has held off increasing the prices of gasoline and electricity,” says the professor.

For Meliane Silva, however, current inflation is already changing the family’s habits, cutting back on things like cheese, yogurt, and snacks. “It has been difficult to pay the bills this year,” she says with a sigh. “We are back to buying only essentials.”