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Six Routes

The Brazilian middle class faces an uncertain future

Lizzie O'Leary Feb 26, 2015
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Six Routes

The Brazilian middle class faces an uncertain future

Lizzie O'Leary Feb 26, 2015
HTML EMBED:
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On a warm evening in mid-February, Cleide de Melo and her daughters prepare a large, festive dinner for visitors on the outskirts of Sao Paulo, Brazil. Cleide, 53, grated onions and carrots for a cheese soufflé, while her daughters Daniele and Vanessa, 34 and 23, crowded around the stove, making chicken fricassee and couscous.

The three generations of the de Melo family tell the story of both perseverance and mobility. And it’s one that reflects a larger journey of Brazil’s middle class over the past decade. A middle class that has grown to almost 50 million people, yet is threatened by a stalled economy, rising inflation, and consumer debt.

Cleide de Melo came to Sao Paulo in 1985 as a pregnant 17-year old, when her parents banished her from their house in Recife, in northern Brazil. She had no money, and had to leave then-baby Daniele behind with a sister in Recife. She worked as a maid, a cleaner, and a caterer. She now has five adult children, and paid down the debt on her home over the course of decade.

“It was the greatest joy of my life,” she says, of the day she paid off the last debt on her house.  “I did everything I could to leave this home to my children.”

Through Cleide’s hard work, her children have opportunities their mother never had. Daniele is a housewife and mother in Recife to nine-year-old Joao, and sends him to private school. Eleonora, 26, works at a high-end boutique in Sao Paulo, and is studying to become a makeup artist. Vanessa is in dental school. And Cleide’s 18-year-old son Lucas is studying engineering and labor safety. A fourth daughter does not keep in touch with the family.

While Brazil has many social programs to alleviate poverty, Cleide de Melo felt strongly that her journey to the middle class has been solely a result of her own effort.

“I am the government,” she said with a short laugh. “I had five children and the government helped me out on nothing. Okay, nobody asked to come to this world, so I had to take responsibility for my children and I did.”

The family’s journey to the middle class mirrors the rise of tens of millions of Brazilians in recent years.

In the early 2000s, Brazil began exporting many of its commodities, like iron ore, soy, and beef around the world, fueled by growth in places like China and India. Those commodity profits, says Hector Gomez Ang of the World Bank’s International Finance Corporation, kicked off a virtuous cycle. “That started creating jobs,” he says. “That’s one of the factors.”

Those jobs then drove a need for services, health care, and education. Added to that, says Gomez Ang, was a state policy in which the government pushed banks to offer credit to consumers at favorable terms for the first time. “That also fueled consumption,” he adds. “People could start buying stuff, and that sort of fed into the overall production. So that if you were buying refrigerators and the refrigerator company was selling more refrigerators than ever before that created jobs and so on.”

The combined effects of this boom lifted 50 million Brazilians into the middle class from 2003 to  2014, according to the Organization for Economic Cooperation and Development. In addition, direct government payments to the poorest of the poor, known as the Bolsa Familia, helped alleviate much of the worst inequality in the country, according to many economists.

But with the economy now stalled and potentially headed for recession, the good times may not last for the middle class.  Many Brazilian families bought on credit over the past decade. According to Gomez Ang, the typical family spends about a fifth of its income just paying off debt.  

That debt, plus the tenuous nature of the past decade’s economic and social progress have some experts worried.

“The present predicament of Brazil is whether Brazil will prove that the social gains are sustainable,” says former Finance Minister Rubens Ricupero. “And it’s very doubtful. Because you know now it is almost three years that Brazil has grown very little or nothing at all.” Ricupero fears the country is already in recession, and says the latter half of 2015 will hit middle-class Brazilians particularly hard.

Add to that a corruption scandal at Brazil’s largest company, Petrobras. Executives at the state-run oil firm are under investigation for taking bribes and funneling money to the political party of President Dilma Rousseff.

Even at dinner in the de Melo household, Petrobras cast a shadow. “It’s devastating for Brazil,” says 18-year-old Lucas. “Because its effect, it’s the money being siphoned out. It’s the negative impact for the market.”

His older sister Eleonora jumps in, cautioning her younger brother about his chances of finding work after school. “And it causes unemployment,” she adds.

Still, the family was philosophical about what was coming next.

They said they expect a rough patch in the economy. Eleonora says she already sees customers at her boutique buying less. “Now they are afraid to spend,” she said. But following their mother Cleide’s example, all the children are certain that no matter what the Brazilian economy held for them in the short term, they were determined to make a better life.

“I wake up and thank God,” says Eleonora. “I feel I’ve got to go to fight to work to accomplish my things.”

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