Brazil dashboard

This page allows one to keep an eye on Brazil's current economic conditions, the longer-term growth trend, and a few of the primary fundamentals contributing to the trend.


15 Dec 2012.

Growth over the last year was about 0.9%, compared to a CAGR of 2.9% over the last 15 years. Recent peak growth was driven partly by exports to China, whose own growth is unsustainable, and by a one-off burst of credit to the household sector. Among Brazil's greatest strengths are a young population and excellent natural resources, especially farmland and oil. Among its greatest weaknesses is a populist and corrupt government and infrastructure that ranks among the world's worst.


  • Brazil agriculture (14 Dec 2012) Farming in and of itself is impressive. Agricultural research and education is top notch, there is plenty of land, almost all of which is cultivated without irrigation, and global demand is high and growing. So productivity, production and exports have all seen high growth over the last decade. However Brazil's roads and ports are among the worst in the world, and this is a major bottleneck for further growth as well as a big negative for global competitiveness.
  • Brazil GDP (30 Nov 2012) In a rapid recovery following the financial crisis, Brazil's GDP growth rate popped up to very high and unsustainable levels, and has mostly been in decline since. The compound annual growth rate since 1997 has been about 2.9%, with the latest year showing growth of 0.9%.
  • Brazil government debt (7 Nov 2012) Brazil's government debt level is relatively modest by modern developed nation standards, but is nevertheless substantial, standing at about 66% of GDP. Lula greatly increased unfunded liabilities (in, for example, pensions), so the debt level bears watching over the next few years.
  • Brazil household credit (12 Jan 2013) Brazilian consumers have recently discovered credit: credit outstanding to individuals grew from 6% to 16% of GDP in just a decade. However the cost of credit in Brazil, at 20-25% in real terms, is very high. Not surprisingly, then, defaults are rising and credit growth may be slowing. The main take-home lesson for investors is that when Brazilian or global companies point to rapid growth in sales to Brazilian households, one should remain a little skeptical – the long-term growth rate is likely to be considerably slower than that seen in the recent boom.
  • Brazil inflation (27 Nov 2012) By the standards of the hyperinflation in the 90s, current inflation, at 5.5%, is very low. However price controls distort the figures to some extent, and even 5.5% is high enough to be disruptive and to discourage the trust required for people to save.
  • Brazil infrastructure (15 Dec 2012)The Global Competitiveness Report 2012-2013 ranks Brazil's ports 135th out of 144 countries (shippers often fill out over a hundred forms for 20 different institutions); the roads are ranked 123rd. Roads carry 2/3 of all cargo, compared to 1/4 in the US (trains are more energy-efficient). India, much smaller physically, and infamous for poor infrastructure, has 7 times more paved roads than Brazil. For many years the government has been announcing initiatives, but change has been very slow. Transportation costs have been a significant drag on Brazil's competitiveness for a long time.
  • Brazil trade (15 Nov 2012) Exports of unprocessed food have been quite robust in the face of global economic slowdowns. This suggests global demand for Brazilian farm products is likely to continue to be strong.
  • Brazil unemployment (10 Oct 2012) The unemployment rate in Brazil has dropped fairly steadily from about 13% in 2002 to 5.3% in Aug 2012. For now the good times for the household sector remains intact.


See also

Clippings below were used in the construction of this page

Brazilian banks are highly profitable

21 Mar 2009. Economist p40.

“Spread bets”

“In a study of bank spreads, the Central Bank concludes that in 2007 the biggest single element (37.5% of the total) was profit. But provisions for loan default were almost as large, and will rise as the economy worsens. The banks blame their high level of loan-loss provision on the frailty of Brazilian courts, which are slow and often kind to debtors.

The third-biggest chunk of the spread comprises taxes. The private banks say there is a fourth element: the directed loans the government obliges them to make at subsidised rates to favoured groups (such as farmers and small businesses) require them to charge their other clients more. They also have to deposit half of their reserves at the Central Bank, for a low return.

Brazil’s banks may be expensive, but at least they are safe. None has yet been troubled by the world financial turmoil. That may be because their profits from everyday banking were so high that they had no need to take silly risks. It is also because bank regulation was tightened after several went bust when inflation was tamed in the mid-1990s.

As evidence that the market is open, bankers point to Spain’s Santander, which has a reputation for competing aggressively on consumer loans and mortgages and which is now Brazil’s third-biggest private bank. But Santander’s Brazilian operations are half as profitable again as its worldwide average. HSBC and Citibank have small operations in Brazil, which are doing nicely. One way or another, Brazilian banking seems likely to remain a profitable exception to the disasters elsewhere.”

Brazilian companies were hit by drawback in cross-border lending

29 Apr 2009. Maverecon.

“Green shoots: grounds for cautious pessimism. Willem Buiter”

“Other emerging markets, like Brazil, have been hit hard by the global downturn and by the freezing up of key financial markets despite being net foreign creditors and running external surpluses prior to the crisis. Brazilian corporates were heavily exposed to the international financial markets, often at short maturities. While the central bank, thanks to its large foreign exchange reserves, was capable of preventing large-scale defaults, the financial squeeze on Brazil’s corporations, plus the terms of trade shock and the decline in export demand has caused the country’s industrial production to fall off a cliff.”

Brazil's credit rating

12 May 2009.

“UPDATE 1-Fitch affirms Brazil rating, warns of fiscal test. By Walter Brandimarte”

“Fitch Ratings affirmed Brazil's investment-grade credit ratings on Tuesday but warned …

Fitch said Brazil's lower primary surplus target for 2009, coupled with an economic contraction and increased Treasury transfers to the national development bank, will increase a public debt burden that is already “significantly higher” than that of similarly-rated countries. “A challenging economic environment will expose Brazil's structurally weak public finances and test the authorities' fiscal credibility as they grapple with a revenue shock in 2009,” Fitch analyst Shelly Shetty said in the statement.

She added, however, that the country does not face financing constraints due to the depth of domestic markets and the proven government ability to access international capital markets this year despite tough market conditions. Fitch currently rates Brazil at BBB-minus, the lowest investment-grade level, with a stable outlook. The rating is supported by a robust external balance sheet, the country's macroeconomic stability as well as political consensus on the thrust of macroeconomic policies, the agency said.

Constraining the ratings is the government's heavy debt burden, currently at 60 percent of gross domestic debt, as well as its weak public finances, modest growth rates and a “glacial” pace of reforms, it added.”

Brazil inflation-indexed bonds as inflation hedge

11 Jun 2009. FTUSA p12.

“Real returns”

“Government debt has shrunk to some 40 per cent of gross domestic product. And with a budget deficit of about 2.5 per cent of GDP, Brazil looks like the acme of fiscal prudence. …

Brazilian inflation-indexed government debt offers a 6 per cent yield. Meanwhile, if the global recovery gains pace, so too will commodity prices, and the Brazilian currency with them. Any investor worried that inflation is headed higher everywhere would struggle to find a better hedge.”

Brazil overview

14 Nov 2009. Economist pi1.

“Getting it together at last”

“Brazil has been democratic before, it has had economic growth before and it has had low inflation before. But it has never before sustained all three at the same time. If current trends hold (which is a big if), Brazil, with a population of 192m and growing fast, could be one of the world’s five biggest economies by the middle of this century, along with China, America, India and Japan.

Despite the financial crisis that has shaken the world, a lot of good things seem to be happening in Brazil right now. It is already self-sufficient in oil, and large new offshore discoveries in 2007 are likely to make it a big oil exporter by the end of the next decade. All three main rating agencies classify Brazil’s government paper as investment grade. The government has announced that it will lend money to the IMF, an institution that only a decade ago attached stringent conditions to the money it was lending to Brazil. As the whole world seemed to be heading into a long winter last year, foreign direct investment (FDI) in Brazil was 30% up on the year before—even as FDI inflows into the rest of the world fell by 14%.

Much of the country’s current success was due to the good sense of its recent governments, in particular those of Fernando Henrique Cardoso from 1995 to 2003, which created a stable, predictable macroeconomic environment in which businesses could flourish (though even now the government continues to get in the way of companies trying to earn profits and create jobs). How did this remarkable transformation come about? And how can Brazilian and foreign firms, from lipstick-makers to investment banks, take advantage of the country’s new stability?

To see why Brazil currently seems so exciting to both Brazilians and foreigners, it helps to understand just how deep it had sunk by the early 1990s. Past disappointments also explain three things about Brazil which outsiders sometimes find hard to fathom: its suspicion of free markets; its faith in the wisdom of government intervention in business and finance; and persistently high interest rates.

When Brazil became independent from Portugal in 1822, British merchants, delighted to discover a big new market, flooded Brazil with manufactures, including, according to one possibly apocryphal story, ice-skates—an early example of emerging-market fever. Even so, real income per person remained stagnant throughout the 19th century, perhaps because an inadequate education system and an economy dependent on slaves producing commodities for export combined to get in the way of development. Ever since the Brazilians have tended to view free trade with suspicion, despite their country’s recent success as an exporter.

In the mid-20th century Brazil seemed to have found a formula for stimulating growth and enjoyed what appeared to be an economic miracle. At one point its economy grew faster than that of any other big country bar Japan and South Korea. That growth relied on a state-led development model, financed with foreign debt within a semi-closed economy. But growth also brought inflation, which crippled Brazil until the mid-1990s and still accounts for some odd characteristics, such as the country’s painfully high interest rates and its disinclination to save. All the same, the “miracle” wrought by the military government persuaded Brazilians that the state knew best, at least in the economic sphere, and even the subsequent mess did not quite persuade them otherwise. Unhappy memories

When this development model broke down amid the oil shocks of the 1970s, Brazil was left without the growth but with horrendous inflation and lots of foreign debt. There followed two volatile decades, when Brazil started being likened to Nigeria instead of South Korea. Productivity growth went into reverse. Many of the country’s current problems, including crime and poor education and health care, either date from that period or were exacerbated by it. Between 1990 and 1995 inflation averaged 764% a year. AFP Cardoso (left) did Lula a big favour

Then a real miracle happened. In 1994 a team of economists under Mr Cardoso, then the finance minister, introduced a new currency, the real, which succeeded where previous attempts had failed. Within a year the Real Plan had managed to curb price rises. In 1999 the exchange-rate peg was abandoned and the currency allowed to float, and the central bank was told to target inflation. The ten-year anniversary of this event has just passed, and although there is continuing debate about how to make the real less volatile, none of the big political parties advocates going back to a managed rate.

More than that, the reforms brought discipline to the government’s finances. Both federal and state governments now have to live within their means. A requirement to run a primary surplus (before interest payments on the public debt) was introduced in 1999, and the federal government has hit the target for it every year since, though there is a good chance that it will miss it this year. This has allowed Brazil to get rid of most of the dollar-denominated foreign debt that caused such instability every time the economy wobbled. Now international creditors trust the government to honour its commitments. Moody’s, a rating agency, elevated Brazil’s government paper in September to investment grade just as the governments of many richer countries fretted about being able to meet their obligations.

Yet growth still proved elusive. It took a buoyant world economy and a surge in commodity prices to procure it. Although Brazil’s economy is still relatively closed (trade accounted for a modest 24% of GDP in 2008, less than 60 years earlier), its growth is closely correlated with commodity prices, the Chinese economy, the Baltic Dry index and other measures of global trade. But at last in 2006 GDP outpaced inflation for the first time in over 50 years. Lucky Lula’s legacy

Brazil’s current president, Luiz Inácio Lula da Silva, has been able to take much of the credit for the country’s recent growth that perhaps properly belongs to his predecessor. Yet Lula’s achievement has been to keep the reforms he was bequeathed and add a few of his own—not a meagre accomplishment given that for the past seven years his own party has been trying to drag him to the left.

Lula is often mocked for beginning his sentences with the phrase, “never before in the history of this country”. What his political opponents find even more infuriating is that he is often right. Brazil was able to cut interest rates and inject money into the economy as the world economy faltered at the end of last year, the first time it has been able to do this in a crisis. Whereas others predicted that world events would tip Brazil into recession, Lula reckoned that the crisis would amount to nothing more than a small tide breaking on his country’s beaches. The economy shrank for only two quarters and is now growing again. The contrast with Brazil’s performance in previous crises could not be more stark (see article).

Plenty of problems remain. The central bank’s headline interest rate is 8.75%, one of the highest real rates anywhere in the world. If the government wants a long-term loan in its own currency it still has to link its bonds to inflation, making debt expensive to service.

Productivity growth is sluggish. That may not seem the end of the world, but it reflects realities such as the two-hour bus journey into work endured by people living on the periphery of São Paulo, the country’s largest city, during which they often risk assault before arriving too tired to be very useful. The government invests too little and has longstanding gaps in policing and education to fill. The legal system is dysfunctional. And so on.

Yet other countries face similar problems, and Brazil has made real progress. In a country where businesses became used to headline interest rates of 30% or more, a rate below 9% comes as a relief. “It’s like the difference between running a marathon with 50 kilos on your shoulders and 20 kilos,” says Luis Stuhlberger of Credit Suisse Hedging-Griffo, one of Brazil’s most successful fund managers. Mr Stuhlberger thinks that Brazil’s recent past was so awful, and its expansion of education and credit is so young, that the country can reasonably be expected to continue on its current trajectory, even without further big reforms. Even so, he argues, “we are not going to have a Harvard or a Google here.” The blame for that, he says, lies largely with government policies.

Brazil’s economic story could certainly be made more exciting with some reforms to its business environment. The country’s potential growth without a risk of overheating can only be guessed at, but it is probably below the 6.8% it reached in the third quarter of 2008. Most economists put it at 4-5%. This suggests that interest rates will not be coming down to levels considered normal in other countries soon.

Still, stability has its own rewards. Edmar Bacha, one of the economists who worked on the introduction of the real in 1994, is pleased that the debates about Brazil’s economy have become so narrow. Back in 1993, when he joined the ministry of finance, inflation at one point hit 2,489%. Nowadays, he notes with a wry smile, “the big debates are about whether interest rates could come down from 8.75% to 8.25%; or whether the central bank should have started cutting a month earlier than it did.” That change has been good for Brazil, and particularly good for its banks and its financial system.”

Brazil's middle class

14 Nov 2009. Economist pi16.

“A better today”

“Using data from a giant series collected by IBGE, based on monthly interviews with 150,000 people in the six main metropolitan regions, the Fundação Getulio Vargas (FGV), a business school, calculates that the share of people in social class C increased from 42% of the population in 2004 to 52% in 2008. Class C covers households with a monthly income ranging from 1,064 to 4,591 reais (about $603-2,603 at current exchange rates). In Brazil that makes them middle-class, even though in richer places these income levels would not buy that description. They mostly have jobs in the formal economy, which also brings access to credit, and probably own a car or a motorbike. Remarkably, their numbers remained steady through the financial crisis, says Marcelo Neri of FGV, as people moved down from class B to replace the drop-outs.”

[Is the definition of social class C adjusted for inflation over time?]

Brazil development bank controversy

7 Aug 2010. Economist p74.

“Nest egg or serpent's egg?”

“EIKE BATISTA, Brazil’s richest man, calls BNDES, the country’s state-owned development bank, “the best bank in the world”. But a former BNDES chairman, Luiz Carlos Mendonça de Barros, says it is a serpent’s egg—a reference to a film about the origins of the Nazi party. And a former central-bank chief, Gustavo Loyola, dubs the bank “Jurassic” and reckons its links with the treasury recall one of the worst periods of military rule. The violence of the rhetoric reflects growing controversy over BNDES and over state interference in the economy.

BNDES’s rate of new lending now far exceeds that of the World Bank. Its gross disbursements reached 137 billion reais ($69 billion, see chart) in 2009, double the amount in 2007. Its political connections are impressive, too. The finance minister is a former head of the bank and the bank’s current head is favourite to succeed him if Dilma Rousseff, the candidate of the ruling Workers’ Party, becomes president.

That political background explains part of the criticism: BNDES is caught up in the campaign for the presidential election, due on October 3rd. But a larger part is attributable to a change in the bank’s financing in the depths of the recession. The government used BNDES to pump money into the economy during the financial slump, with dramatic results. Between September 2008 and January 2010, credit from private banks grew by less than 10%. Credit from public banks rose by 50% and BNDES accounted for half that.

The bank’s critics make three complaints. First, that BNDES has grown too big. This year, it expects to finance 40% of Brazil’s total investment in manufacturing and infrastructure—a huge share and double that which it had in 2004-06. Next, they say, its loans are subsidised and its accounts murky. No one is sure of the total subsidy but, as a guide, BNDES lends at about 6%, well below the yield on ten-year government bonds of 12%. The treasury subsidises the difference which, on $100 billion of outstanding loans, would be some $6 billion a year. Márcio Garcia, an economist at the Pontifical Catholic University in Rio de Janeiro, calls the subsidy “a parallel [state] budget”.

Third, critics reckon BNDES lends to the wrong people. Four-fifths of the value of its loans goes to large companies (those with over 500 staff). The bank has lent Petrobras, the state oil giant, 25 billion reais. JBS and Marfrig, two large firms, got about 18 billion reais between them. Both have been on acquisition sprees abroad, snapping up American food suppliers. This, the critics say, is the covert creation of national champions by the state.

Not so, replies João Carlos Ferraz, BNDES’s director of planning. The loans to JBS and Marfrig were commercial decisions, made by the bank’s commercial arm, at commercial rates. The subsidy is less than $6 billion a year (though he does not say by how much). And subsidies are not accounted for to Congress like other items of public spending because the loans are backed by assets from borrowers, so they do not increase net public debt.

There are, though, two criticisms which are harder to shrug off. First, BNDES seems to have gone on boosting its loans for too long. Between 2001 and 2008 it acted as a useful counterweight to the credit cycle. But that pattern has changed dramatically. Even though the economy has rebounded this year, BNDES loans have continued to rise sharply. Eduardo Giannetti, economic adviser to Marina Silva, the presidential candidate of the Green party, reckons that what might have been justified as an emergency measure is instead turning into an open-ended commitment for billions.

Second, BNDES is hampering the development of the financial sector. At the moment, Brazil’s banking system is peculiar: commercial banks lend to the government and supply consumers credit, but do not provide much debt to businesses, which mostly finance themselves from retained profits. And BNDES is practically alone in the long-term loan business. Two-thirds of its revenue comes from loans of over five years. In contrast, private commercial banks get, on average, just 1%.

Ideally, commercial banks need to get into the business of long-term lending to companies. But so long as Petrobras, Vale (a mining giant) and JBS get subsidised credit from BNDES, why should they? Some of the criticism of BNDES is no doubt questionable. But the bank is growing too fast. And it needs greater transparency and much more competition.”

Overview of the last few years

2 Oct 2010. Economist p29.

“Lula's legacy”

“Since 2003 some 20m Brazilians have emerged from poverty and joined the market economy. These new consumers buy everything from cars to cookers and fridges to flights. To this burgeoning domestic market, add China’s appetite for Brazilian iron ore, meat, soya and more, and in economic terms this is probably “the best moment in the entire history of Brazil,” says Marcelo Neri of the Fundação Getulio Vargas, a university. …

“Wherever you go in Brazil you will see work financed by the federal government,” he says, highlighting railways, power stations and basic sanitation. After 25 years in which the country failed to maintain its infrastructure, let alone build any more, it is “reacquiring the capacity to carry out the grand infrastructure works that Brazil needs.”

For many of the poor and working-class Brazilians who are his most ardent supporters, Lula’s crowning achievements have been big rises in the minimum wage and pensions, and the Bolsa Família programme, which gives 12m families small but life-changing amounts of cash in return for having their children vaccinated and keeping them in school. By boosting domestic demand, these policies have also contributed to economic growth. …

The increase in public spending in 2008 shortened the recession, but much of it has not been reversed even as the economy roared back to life. Some of it involves printing money, disguised by accounting tricks: while the government’s net debt is falling its gross debt is rising, and its deficit helps to keep Brazil’s interest rates high (though they are lower than a decade ago). “Such pro-cyclical spending makes no sense,” says Mauro Leos of Moody’s, a ratings agency. “When times are bad—and bad times always come—Brazil will be sorry it hasn’t been putting money aside.” …

The government has used a huge ($67 billion) new share issue by Petrobras, launched on September 23rd, to raise its stake in the company from 40% to 48%. It is paying for this partly by selling oil deposits to the firm and partly by more accounting sleight of hand involving the National Development Bank (BNDES). In all, state bodies bought 60% of the offered shares.”

Pre-salt overview

29 Oct 2010.

“Brazil deepwater well hits huge oil reserve. By Jonathan Wheatley”

“The Brazilian government has found up to 15bn barrels of oil in a deep-water field known as Libra, in a further indication of potentially enormous reserves contained in the so-called pre-salt region first discovered in 2007.

If confirmed, the Libra field alone could more than double the size of Brazil’s current proven reserves of about 14bn barrels of oil and natural gas equivalent.

No figure has yet been put on the entire pre-salt region, so called because its oil is trapped beneath several kilometres of seawater, rock and a hard-to-penetrate layer of salt. But people in the industry say it could contain 100bn barrels or more, enough by some measures to put Brazil on a par with Kuwait or Russia among oil producers.

The ANP, the industry regulator, said the Libra field contained between 3.7bn and 15bn barrels of oil, with 7.9bn being the best estimate according to a study commissioned from Gaffney, Cline and Associates, an advisory firm.”

Too much consumption, not enough investment

14 Nov 2010.,dwp_uuid=05161284-eaff-11df-811d-00144feab49a.html

“Economics: Stability is not the same as durable growth. By John Paul Rathbone”

“stability is not the same as durable growth – especially when much of it is based on a consumption boom, in which bank lending is growing at a 20 per cent annual clip. …

Exports have risen by 40 per cent over the past five years, for example, but imports have almost doubled.

One result of this consumption boom is a steadily widening current account deficit, forecast to reach about $60bn this year, or 3 per cent of gross domestic product. …

On the one hand, the country needs foreign savings. In 2008, according to the World Bank, Brazil saved a mere 17 per cent of GDP, against 38 per cent in India, and 54 per cent in China.

At the same time, it needs to boost investment – both to maintain growth and to build the new roads and better ports that will help companies become more competitive and so vault the strengthening exchange rate.

Yet, historically, Brazil has invested only about 15 per cent of GDP a year.

To reach the 25 per cent level of most emerging economies would require another 10 percentage points of GDP – some $200bn a year, notes Neil Shearing, an analyst at Capital Economics, the consultancy.

As this funding would come from abroad, however, that implies even more capital inflows.

The country is not in any danger, yet. But “Brazil has to take care not become complacent,” says Armínio Fraga, a former central bank governor.

The surest solution would be to cut government spending, currently growing at 18 per cent a year.”

Unsustainable boom in Brazil

28 Apr 2011.

“Brazil’s boom masks growing vulnerabilities. John Paul Rathbone”

“Plug in 2005 commodity prices, for example, and Brazil’s $23bn trade surplus would become a $20bn deficit. If Chinese demand for commodities were to fall – and it cannot be sustained for ever – Brazil’s growing deficit would explode.

Meanwhile, the government has pursued the state-led mega-projects – most particularly in the oil sector – in which Dilma Rousseff, the president, believes and that are part of a global ideological shift towards bigger government. The echoes with the 1960s and 1970s are eerie – and not just in Rio’s retro-looking buildings and street decor.

The Brazilian real is the most overvalued major currency in the world. Cheaper imports have made Brazilians feel richer, feeding a consumer boom. But domestic manufacturers have appealed for help – and the same kind of tariff protections that characterised the doomed economic model of bygone years.

Finally, to deal with the global financial crisis, the government opened up the taps – and has only just started to withdraw the stimulus. Ultra-low interest rates in the United States, Europe and Japan has flooded the country with capital, pumping up the economy further. Bank credit is now growing at a 20 per cent annual clip.

That has given Brazil’s economy an appearance of strength, but also risked stretching it thin. Typically, Brazilians now spend a quarter of disposable income on debt payments. At the height of the US credit boom, by contrast, American households spent about 15 per cent. If US interest rates were to rise, Brazil’s boom could turn to a sudden bust.”

The working middle class and the subsidized middle class

20 Jul 2011.

“Brazil’s tale of two middle classes. Joe Leahy”

“The story of Brazil’s success in lifting millions of people out of poverty over the past decade has really been a tale of two middle classes.

While headline economic growth has not been as spectacular in Brazil as in China and India, at an average of about 4 per cent a year between 2003 and 2010, the balance of income distribution has improved more rapidly in Latin America’s largest economy than in the other large emerging markets.

In Brazil, mean household income since 2003 rose by 1.8 percentage points a year above the rate of gross domestic product growth, helped by generous increases in the minimum wage and welfare handouts. In China, by contrast, the rise in household income trailed GDP growth by 2 percentage points a year.

On the winning side have been an estimated 33m people who since 2003 have risen to the ranks of the so-called “new middle classes” or above. Today, 105.5m Brazilians out of a total population of 190m are members of this group, who earn between R$1,200 and R$5,174 per household. Also better off are the rich, who have profited from a stock market, commodities export and consumption boom.

On the losing side, say sociologists, are the 20m or so people of the “traditional” middle classes who earn more than R$5,174 per household. Unlike in India, where the old middle class benefited from the creation of new industries, such as information technology outsourcing, many in the Brazilian middle class complain of rising prices, taxes, congested infrastructure and increased competition for jobs.

“In the past 10 years, the income of the poorest 50 per cent of the population grew 68 per cent in real per capita terms while the income of the richest 10 per cent grew by 10 per cent,” says Professor Marcelo Neri of the Getulio Vargas Foundation (FGV) and the co-ordinator of a large-scale study on Brazil’s new middle class.

Even more startlingly, the income of the average illiterate person rose 37 per cent between 2003 and 2009, while that of the person with at least an incomplete university degree fell 17 per cent. “It’s up side down,” says Prof. Neri. …

The process has been driven partly by increasing access to education. The new middle class has flocked to private universities and technical colleges and begun competing for jobs with the traditional middle class. …

Some complain that the government helps the poor through benefits and wage rises and the rich through subsidised loans for their corporations. This flushes the economy with money, leading to inflation, which the central bank then tries to quell through higher interest rates, penalising the middle-class.

While many in Brazil’s traditional middle-class agree with wealth redistribution, they are afraid of how much it is costing them.”

Overview on Petrobras

5 Nov 2011. Economist p81.

“Filling up the future”