Rio Gringa

Brazil's Bus Fare Protests: More Than 20 Cents

Ongoing protests against a rise in bus fare continued in São Paulo and Rio tonight, as well as other cities. Thousands hit the streets in Brazil's two biggest cities, with continued violent clashes between police and protesters in both cities. But it was the images in São Paulo of peaceful protesters surrounded by riot police or being fired on with rubber bullets, as well as the news that at least half a dozen journalists were injured in the fray, that showed a different story shown by some media outlets of one of a horde of hooligans.

What, then, brought so many people to the streets? In both cities, bus fare is slated to rise by R$0.20. Clearly, this is not an insignificant amount for those making the minimum wage, but the demonstrations also attracted members of the middle class, too. Considering that unemployment is still low and wages have risen over the last decade, why protest fare increases now?

Brazil protests focus on bus-fare increases. But they come at time of high inflation, sluggish growth & sharp fall in currency. Coincidence?

— Simon Romero (@viaSimonRomero) June 14, 2013

First, there's the economic issue. As I wrote yesterday, inflation and the rising cost of living seem like the immediate triggers.

But my hypothesis beyond the immediate economic issues is this: the São Paulo and Rio protests have more to do with the evolution of Brazil's middle class amid a stagnation in quality in life.

On one hand, there are more and more people moving into the so-called new middle class, gaining higher salaries and levels of education and as a result, come to expect a higher standard of living. But some things haven't changed much. Crime is a major concern, especially in Rio and São Paulo; muggings, gun violence, and home invasions are serious security challenges. Public transportation is still inadequate and often of poor quality, and traffic means workers from different levels of the socioeconomic spectrum have long commutes. Many consumer goods are still expensive, and the cost of living--including basics like food and housing--is high. "It's a general feeling of being fed up," a friend in São Paulo told me.

However, it's also the traditional middle class that has grown tired of this stagnated quality of life. Some feel they have earned a quality of life closer to that of high-income countries, and are frustrated by paying high taxes with low returns. At the same time, some resent the new middle class for "invading" spaces normally reserved for the better off, and the new middle class is well aware of how it is viewed. Several people mentioned that during the protests, people were throwing around the word "burguês." Maybe these class tensions are becoming more obvious.

Esses manifestantes sao "uns burgues q n tem o q fazer"

— SoninhaFrancine (@SoninhaFrancine) June 13, 2013

There are also a few interesting things to note.

The first is that the protests have no obvious associations with political parties. Brazil's most famous large-scale protests in recent memory are those against the dictatorship and the transition to democracy. Since then, there certainly have been protests (especially in São Paulo), but frequently, big manifestations have tended to involve labor unions, political parties and campaign rallies, public employees, or religious groups. To a lesser degree, there are also niche causes like women's rights rallies and pro-marijuana marches. But because this week's protests were not organized by elected officials, labor unions, churches, or political parties, it's taken some by surprise. 

A mente petista funciona assim: "como pode haver movimentação social sem eu ter autorizado, sem eu ter cooptado?"

— teclologoexisto (@teclologoexisto) June 14, 2013

The other interesting thing to note is how bitterly the protests have divided people, especially in São Paulo. There's the side that says that twenty cents is not that much, and that a bunch of disorganized, left-wing instigators are using violence to incite chaos. There's the other side, that supports the right to protest and encourages people standing up for a cause. But evidence of police brutality--beating protesters and members of the press, and using tear gas, bombs, and rubber bullets--have resurrected ghosts of the dicatorship for many, causing anxiety about state security.

There's also the issue of social media, which like in other parts of the world, helped both fuel and organize protesters, and allow people the world over to follow the manifestations in real time. And because of the grossly incompetent response by São Paulo's state and local governments and the resulting violence, the protests evolved into something much bigger than they could have.

Image: Police fire on protesters in São Paulo. Via Feridos no Protesto em São Paulo.

Way Beyond Weight

Maria Farinha Filmes, the company behind 2012's "Way Beyond Weight" (Muito Além do Peso), released the movie on Vimeo recently, so it's available for worldwide viewing.

The film sheds light on Brazil's child obesity epidemic, ranging from this terrifying statistic about infant soda consumption to the fact that on average, Brazilian kids spend three hours per day in school and five hours per day watching TV. The movie also looks at the fact that obesity in general is a growing problem in Brazil. It points out, for example, that Brazilians consume an average of 112 pounds of sugar a year.

But perhaps what's most interesting about the movie is putting Brazil's obesity epidemic into a global perspective as a result of deepening globalization. While interviewing Brazilians across the country from all levels of the socioeconomic spectrum, the movie also includes foreign voices, including people from the United States, the United Kingdom, China, and Mexico, among others. One Brazilian observer explains her perspective that a country is defined by the food it eats, and that it is not necessarily a good thing to be able to go anywhere in the world and eat the same exact thing. There's also an interesting point that applies to other large growing economies: parents sometimes send unhealthy processed food for children's school meals to show off a new ability to consume, and giving kids products they may not have had access to when they were young.

Watch the documentary here:

MUITO ALÉM DO PESO from Maria Farinha Filmes on Vimeo.

Favela Consumers: The Invisible Market?

With the expansion of Brazil's middle class, something has become increasingly clear: favelas are home to a vast and growing number of consumers. Though this was apparent to companies like Coca Cola and Nestlé over a decade ago, the purchasing power of favela residents has risen due to a jump in salaries, a decrease in unemployment, and greater access to education.

Brazil's so-called "C class" grew by 50 percent in urban favelas over the last decade, according to a new Data Popular study. Now, around 65 percent of favela residents are considered middle class, versus 37 percent in 2002. Brazilian favela residents--around 12 million people--earn around $28.4 billion a year, the equivalent of Bolivia's GDP. "This used to be an invisible market, because it was right under our noses," says Data Popular Director Renato Meireilles, "but people only saw favelas through the perspective of violence and drug trafficking."

Over the last ten years, access to goods for favela residents has exploded. The number of those with washing machines doubled to over 50 percent. Nearly 90 percent have cell phones, and 40 percent have computers. Around 45 percent are regular internet users. While most daily purchases are made within favelas, larger purchases, like electronics, are made in stores outside the community. About 70 percent of favela residents go to the mall every week, and 50 percent eat out on a weekly basis. Around half said they plan to buy furniture within the next year, and 36 percent plan to buy home appliances.

Some companies have taken note. Casas Bahia, one of the country's largest retailers, opened a store in Rio's Rocinha in November. On opening day, the store sold 10 times as much as the average store, and the chain plans to open a third favela location in 2013. Vai Voando, an airfare vendor, has 70 stores in favelas alone, largely in Rio and São Paulo. The company counts around 3,000 passengers a month, with 43,000 customers since the company started two years ago. The company's owner, Tomas Rabe, plans to open 50 more stores this year.

Now, plans are underway to build Rio's first favela mall, in the "pacified" Complexo do Alemão. The $10 million investment aims to open 500 stores, at least 60 percent of which will be run by local favela residents. All maintenance, security, and janitorial work will also be done by locals in order to create jobs, especially for youth. A branch of Caixa Econômica bank will offer microcredits for small businesses within the mall itself. The mall also plans to house local street vendors. The project is due for completion later this year. Elias Tergilene, a former street vendor who runs a series of malls, is behind the initiative. He hopes to invest $253 million over two years in favela malls, aiming to open similar shopping centers in São Paulo and Belo Horizonte.

However, not everyone is happy about the new favela consumers, who along with buying computers and washing machines are also frequenting some of the same public spaces once reserved for the wealthy. "The C class put an end to the exclusivity of the A class in that the new middle class began to consume products and services that it didn't buy before," Meireilles told me in November. His company found that around 50 percent of upper class consumers only want to be around people from their social class, and over half believe that products should come in different versions for the rich and the poor.

A salient example of this recently emerged in Rio. A new beach club in Copacabana opened, offering a private strip of sand on one of the city's public beaches. For an entrance fee of between $45 and $126, beachgoers can get into the exclusive club--where safety and a clear separation from so-called favelados (favela residents) are considered selling points. "I stopped going to Ipanema and started coming here every day because it's a much more select crowd," sociologist Camilia Diniz told VEJA. "I can drink champagne out of a glass and brush my hair afer swimming." The manager of the beach club noted: "Everyone can come here without being afraid of wearing a Rolex or bringing a Louis Vuitton bag."

Image: Rocinha favela in Rio, Memorias do PAC.

Consumption in Brazil: What's Really Going On?

With Brazil due to grow by only 1 percent this year, one of the big questions is how the economy will affect the average Brazilian and consumption, if at all. In reality, this is an ongoing debate, especially one that's been hashed out in the foreign press. Brazil has been growing slower for the past two years, so what does that mean on the micro level for consumers? In a country where an estimated 80 percent of the GDP is linked to consumption, it's an important question.

If you just read about the economy slowing, you might think things look pretty grim. The country's third quarter growth numbers literally surprised economists it was so low--half of what they expected. Dollar flows are way down: $22.16 billion so far this year compared to $66.98 billion during the same period last year. Exports have decreased, imports are up. Demand for consumer credit dropped 7.6 percent last month. Requests for U.S. visas were down 29 percent in São Paulo and 64 percent in Recife last month compared to November 2011. A December CNI/Ibope survey found that 60 percent of Brazilians plan to reduce consumption due to fears about the economy, while 41 percent report that they're in debt. (Hat tip to Dow Jones Brazil bureau chief Matthew Cowley who posted all of these numbers on Twitter recently.) The IMF estimated that 23 percent of disposable household income in Brazil is spent on paying off debt--which is much more than in neighboring Latin American countries.

On the other hand, consumption seems to be humming along. The same CNI/Ibope study found that 63 percent of Brazilians plan to buy at least one durable good (like a car or refrigerator), a home, or go on vacation through the end of the year. Cars, computers, and construction materials were the items with the highest demand. The survey also found that 28 percent of Brazilians saw their family income rise in the last 12 months.

In August, Vincent Bevins wrote a piece for the LA Times in which he explained the "great conundrum" of an economic slowdown that didn't seem to be having much of an impact on many consumers:

The boom in demand for services helps to explain the paradox of low unemployment and low growth, analysts say. Although the industrial manufacturing sector has been suffering because of the high cost of Brazilian exports, local service businesses such as hair salons, restaurants and even banks are relatively labor-intensive, and have been buoyed — for now, at least — by freely spending Brazilians.

And that still seems to be the case. Unemployment is at an all-time low and is still falling. Real wages are rising--they rose an average of 2.5 percent last quarter, and for those without a carteira assinada (papers to work in the formal job market), they rose by 5.8 percent. Family consumption rose by 3.4 percent last quarter in comparison to the same period last year.

So like many things in Brazil, things are more complex than they might initially seem. But it looks like consumers aren't deeply affected by the slowdown, at least for now.

Interview with Renato Meireilles

Image: Secretaria de Assuntos Estratégicos

The golden child of Brazil of the moment isn't necessarily a soccer star, or a singer, or a businessman. Brazil's new middle class, also known as the C class, is the country's rising star both at home and abroad. But who really belongs to this group? What does it mean to be new middle class? Do members of the C class even know they're part of it?

To find out more, I spoke to Renato Meirelles, one of Brazil's top experts on this group. Meirelles is one of the directors of Data Popular, a company that studies the new middle class. Read the interview in English and Portuguese below.

What does it mean to be part of the C class in Brazil?

I think the C class doesn't have the slightest idea that it's the C class. Because it's a term used in the world of marketing and research. It's not a day-to-day term that people use. What we've seen is that it's a growing middle class, a lower middle class that's growing, people who are improving their lives and are living a reality that's better than that of their parents.

What's the average person from the C class like?

They're families that have an average income of $1,191 per month. Fifty-two percent are black. They're young and have an average age of 33. They're people who are proud of their origins, proud of their history, and value work and education.

The Brazilian government says that the average income per capita of the new middle class ranges from R$291 to R$1,091 ($138 to $485 per month). For a family with an average per capita income of $138, isn't that very little?

Well, it depends what you compare it with. If you compare it to North American standards, it is little. But the average North American salary is higher than that of 94 percent of the world's population. When you compare the government's range of R$291 to R$1,019 per person with the rest of the world, the Brazilian middle class is richer than 54 percent of the global population. In other words, compared to the rest of the world, the Brazilian middle class is an upper middle class. And this middle class moves R$1 trillion ($476.4 billion) a year. It's a lot of money.

An interesting fact is that if the Brazilian middle class were a country, it would be the 12th largest country in the world by population and the 18th largest country in terms of consumption. It would be in the G20 of global consumption.

Your company did a study about upper class and traditional middle class attitudes toward the new middle class. What did you find? 

What we saw is that the elite is bothered by the ascension of the C class. The elite thinks there should be products for the rich and products for the poor. The elite that wants exclusivity is annoyed by the C class on airplanes. The elite thinks that the big malls should have separate elevators for bosses and employees, and this has to do with the democratization of consumption in Brazil. The elite that has always spent its money in exclusivity is bothered by the consumption of the C class.

Why are they bothered?

The C class is learning to consume; traveling in airplanes, for example. Members of the C class don't know what check-in is, so they cause confusion in the airport lines. Members of this class don't understand they have to pass through a metal detector before they travel. When any human does anything for the first time, he has a lot of questions. This behavior annoys the A class (the wealthiest social class) that for years has consumed with exclusivity. The C class put an end to the exclusivity of the A class in that the new middle class began to consume products and services that it didn't buy before.

Are there other examples of members of the new middle class adapting to consumption?

There's the example I gave when I went on the Programa do Jô about a woman who thought that the "please clean the room" sign at her hotel meant that the hotel was asking her to clean her own room, so she did. In the area of insurance, there are difficulties with some of the contract terms. For example, some people don't understand that "premium" is the payment they have to make each month; they think premium (which is the same word as "prize" in Portuguese) is something they receive from the insurance company! We see examples of people that don't understand the financial bureaucracy involved in opening their own business.

What are some of the risk factors for the middle class?

What we've seen is that maintaining employment levels is fundamental for sustaining the middle class. But what guarantees the sustainability of the middle class is the democratization of education and the universalization of the internet, since connected people expand their network and their possibilities--not only to study but to maintain professional contacts.

Are there differences between the new middle class in the Northeast (a traditionally poorer region) and in the Southeast (a traditionally wealthier region)?

Yes. The Northeastern middle class is a more recent middle class than that of the Southeast and South. So the Northeastern middle class is growing more than the national average and therefore, for the first time, they're consuming a huge group of products and services. Incidents like those on airplanes tend to happen more in the Northeast than in the South and Southeast. The C class in the Southeast is already consolidated.

What does the C class mean for Brazil's big companies?

It's not just for Brazil but also the multinationals. The new middle class is a source of growth in Brazil. The A and B class markets are saturated. So the C class acts as a springboard for sustainable growth in Brazil.

During a period of the international economic crisis when it's more difficult to export, the Brazilian middle class guarantees Brazil's internal market, consuming more than R$1 trillion. As I mentioned, if the Brazilian middle class was a country it would be in the G20 of global consumption and this internal market guarantees the sustainable growth of the Brazilian economy.

What's the role of credit in terms of the growth of the middle class?

Credit is essential for driving consumption. What is credit? It's what you pay to consume now what you only have money to buy tomorrow. So it's important because it anticipates job creation and improves the quality of people's lives. So if a woman joins the labor market, she isn't able to continue washing clothes in the sink, so she has to buy a washing machine, for example. On the other hand, people that are acquiring credit for the first time have difficulty in long-term financial planning, to schedule their expenses and debt payments. Brazil is far from a credit bubble like the one that happened in the United States and Europe. Indebtedness in Brazil is still very low. But now it's necessary to have policies that teach people how to use credit in their favor and to ensure that credit doesn't become a boomerang that works against them.

What's the most important product or service for the new middle class?

What's growing the most in terms of products is basically technology like computers, cell phones, and tablets. Buying a computer is seen as an investment. Cars are growing a lot too.

From the perspective of services, it's tourism. This is happening because in Brazil, vacations are paid [workers receive 30 days of paid vacation]. Along with the paid month of vacation, a worker also receives a third of his salary which is often used for travel. You see a growth in beauty services like beauty salons and plastic surgery, which are largely driven by women joining the labor market. There's also growth in the education sector, driven by youth who are looking for professional opportunities to get better jobs.

Are women important to the new middle class?

Women are fundamental for the new middle class. Women make up 38 percent of the income of the Brazilian middle class. As women join the labor market, there's an additional source of income for their families. In the Brazilian middle class, women now get more education than men.

Learn more about Meirelles and his take on the new middle class in his appearance on Globo's Programa do Jô.

Leia a entrevista em português abaixo.

Brazil Under Construction

Driving through the dusty rolling hills on the western edge of Juiz de Fora, a mid-sized city in Minas Gerais about two hours from Rio, you'll notice bulldozers cutting away swathes of grass and the first signs of concrete. Soon, the scenic countryside will give way to a massive residential and business complex. Here is the site of Alphaville, the latest self-contained mini-city under construction in Brazil's urban areas. The complex will stretch nearly 2.1 million square meters, and is advertised as a "true planned neighborhood," perhaps a reference to favelas, which for a long time were not considered real neighborhoods. It won't just have homes. It promises a commercial center, services, leisure activities, and even a government building: a city within a city.

Originally built in Barueri outside of São Paulo city in the 1970s, the first Alphaville encompasses 3 million square meters and along with residential housing has its own schools, shopping centers, banks, hotels, supermarkets, a movie theater, and other services. Security is run by the complex and is tight. Now, there are nearly 45 Alphavilles established or under construction throughout Brazil--all the way from Manaus in the Amazon to Foz de Iguaçu on the border of Argentina.

Targeted at the upper-middle class as an escape from the dangers of urban life, these walled communities are the antithesis of favelas, with luxury homes secluded from the rest of the city and providing enough services that means you may not even have to leave. Alphavilles are "planned, self-sufficient, and sustainable centers with complete and planned infrastructure for a rational level of occupancy that guarantees harmony between urbanized space and the environment," the website reads.

And it's not just Alphaville. Eike Batista, one of Brazil's wealthiest men, recently purchased former amusement park Terra Encantada in Rio's Barra de Tijuca to turn into a self-contained neighborhood. The 700,000 square meter space will be converted into residential and commercial buildings in an area of the city that requires a car to get from place to place. "Cariocas like to do everything on foot," he said last month. "In my neighborhood, people will feel like they're in Zona Sul." He said he would live in the neigborhood, too. "It will be a development with all of the infrastructure of a planned neighborhood, but like Ipanema."

It's not just these walled mini-cities springing up in Brazil. Cranes pepper the skyline in São Paulo and Rio as new apartments are under construction, given a growing middle class and a booming real estate market. Open any newspaper and you're likely to see a dozen ads for apartments. Meanwhile, the government's Minha Casa, Minha Vida program for subsidized housing and loans for low-income and middle class buyers is in its second phase. Beginning in October, the government lowered interest rates while raising the maximum value of homes in the program. Since the program began, one million homes have been constructed.

And with the busy bees of construction at work and the sense of confidence in the country's growth, there's little evidence that people are worried about Brazil's economic slowdown, industrial stagnation, or the potential for rising inflation. With record unemployment and continued consumption, Brazilians don't seem too concerned about the economy. On the contrary: the buzz of construction sounds belies any slowdown.

 

Novelas and Brazil's New Middle Class

Shoppers in Rio's Bangú neighborhood

Two of Brazil's recent primetime TV shows feature the country's rising star of the moment: the new middle class. Cheias de Charme, or Full of Charm, just concluded a five-month run in at 7 p.m., receiving an average viewership of 34 points, higher than recent novelas in the same time slot. Avenida Brasil, Globo's 9 p.m. novela, ends in several weeks and enjoys a large viewership, reaching up to 65 percent of Brazilian TVs. The fact that two of the most watched television programs on Brazil's most watched television network showcased this group is telling, with a number of interesting implications. 

Traditionally, novelas were aspirational, often starring wealthy characters. Now, with the two novelas this year, they're intended to be relatable, a reflection of the tens of millions from the C class, or the new middle class. "When we portrayed poor people, they were always dreaming of leaving their suburbs and striking it rich. But now we want to show a place that, in spite of being poor, is cheerful and warm, a place where there can be prosperity,” Ricardo Waddington, coordinator of Avenida Brasil told Folha de São Paulo. Showing members of the new middle class flourishing represents a new type of aspiration. "Here in Brazil, there's a real problem in understanding how the lower middle class thinks. This lower class doesn't hold up the elite as a model. The reference for these people is not the rich, but rather the neighbor who succeeded," Renato Meirelles, CEO of Data Popular--a marketing firm specializing in the middle and lower classes--told the AP.

 

In some ways, the novelas are glorifying parts of Brazilian culture long considered inferior by the upper class. The two novelas offer insight into what the new middle class is like: how they dress, speak, and consume--or at least, Globo's vision of these elements. The novelas prominently feature working class neighborhoods, as well as using types of music popular with the new middle class like pagode and forró. Avenida Brasil's costume designer went out to Rio suburbs Bangú and Madureira for inspiration, as well as incorporating what singers and soccer players from working-class neighborhoods wear.

 The shows have used aggressive marketing both during commercials and offscreen for the new middle class. Commercials during the show target the C class, with everything from electronics stores to what one could call shoe porn:

 

As with many novelas, the products used on the show become must-have items, particularly for women, and despite featuring new middle class styles, Avenida Brasil is no exception. Pants and jewelry worn by the Suelen character have been a hit across the country. Globo licensed six lines of products made up for 50 items from Avenida Brasil alone. Riding on the metro in Rio, you can spot an ad labeled "Da TV para você" (from the TV to you), advertising hair products featured on the novela. You can even see ads on some of Rio's highways advertising the Guadalupe Mall as featured on Avenida Brasil.

Targeting the new middle class is an important marketing strategy, given the group's buying power and what the new middle class is purchasing. A recent IBGE study found that the C class spends more money on durable goods like cars, home appliances, and medicine than on food, education, and culture. The C class also helped drive Brazil's credit boom, and in Rio, one can buy a coconut or a meat skewer from a street vendor with a credit or debit card in some cases. As a result, the new middle class is quickly racking up debt; a September Kantar Worldpanel survey found that of Brazil's five social classes (ranging from A, the wealthiest to E, the poorest), the C class is the only one in which people spend more than they earn.

But being the center of one of the country's most watched shows doesn't mean that the traditional middle class or the upper class are celebrating the ascension of millions of Brazilians into the C class.

In fact, there's evidence that some are uncomfortable with this social group--long considered relegated to the outskirts of large cities and outside of spaces frequented by the the well-off--suddenly having money and access. This conflict has been obvious, particularly in places like airports where members of the new middle class rarely set foot before. But now it's statistically proven: a Data Popular survey found that a large portion of the wealthier sectors of Brazil are unhappy with the new middle class. The study showed that 55 percent of upper class consumers believe products should have separate versions "for the rich and the poor"; 48 percent believe the quality of services declined with the rise of the new middle class; 50 percent prefer going to places occupied by members of the "same social class"; 16 percent believe "poorly dressed" people should be barred from certain places; and 26 percent believe subways would bring "undesirables" to their neighborhoods. You also need look no further than Classe Média Sofre, a blog that details some of these tensions the traditional middle class and upper classes have with the new middle class.

"You're seeing people going to the theater or taking a flight for the first time ever, and the first time is very important," Marcelo Neri, head of research institute Ipea and Brazil's new middle class guru told O Público. "But it's a class that isn't accustomed to reading. This creates prejudice from the upper class. There's class conflict at the airports, since the elite always had empty airports to themselves. The new middle class makes them uncomfortable. Culturally, there are a lot of things happening but it's not traditional culture. It's in the periphery of cities."

The novelas may also include less obvious subtext about new middle class culture. Avenida Brasil writer João Emanuel Carneiro described the so-called "poor-rich" characters on the show as those who are "simple people who became rich but maintained their suburban ways." In describing how these characters figure into the show, columnist Mauricio Stycer points out the protagonist's "more subtle objective is to...'civilize' the poor-rich." Será?

Photo: Luiz Fernando Reis