The two faces of Brazil – the rich and the poor


Elaine Smith and Instituto Geracao


Elaine Smith

Jornal o Estado de Sao Paulo posted some enlightening data in an editorial late last year. A translation of the data can be found below, followed by my two cents’ worth: 

‘The higher income that we saw in Brazil over the last 10 years improved most life conditions for Brazilian families, making indicators soar to developed-country levels if one considers the acquisition of consumer goods as a reference. However, Valor Economico newspaper showed on 21 Oct that basic public services that are under government responsibility are still comparable to the poor countries in the world for most of the citizens. (…)

‘Brazil is today the eight consumer market in the world, according to World Forum sources. 96.3% of houses now have refrigerators, up from 85.1% in 2001. TVs are in 97.2% of houses (up from 89%) and 51.6% of houses have washing machines (up from 33.6% in 2001). Almost all houses now have ovens, and the number of computers with internet access increased fourfold, to 37.1%.

The Instituto de Pesquisa Economica Aplicada (IPEA – Institute of Applied Economic Research) says these data have a direct relationship with the reduction of inequality in income. There was a rise of 16% in the average income between 2001 and 2011, and this improvement was concentrated in the 50% poorest of the population. Fundação Getulio Vargas (FGV) says that people in this tax bracket saw a salary improvement of 68% above inflation. Also, formal employment increased by 48.1% from 2003 to 2011.

Credit offered by official banks increased to 51% of the GDP, a growth of 25% between 2002 and last August. This, along with lower taxes to reduce prices, also helped the acquisition of durable goods.

With some job stability and salary gains, along with easy credit and tax cuts, Brazilians went on a shopping spree. This new middle class now see their favourite TV shows on flatscreen TVs, but they also cope with garbage around their front door, poor sewage systems and bad schools for their kids. IBGE (the statistics bureau) shows that 40% of Brazilian homes don’t have a sewage system or clean water. (…)

The data on education is also dark. The development index of Basic Education in 2001 shows that most students can’t do more than the four basic maths operations, nor can they read and write satisfactorily. All of this is reflected in Brazil’s ability to compete for markets. (…)

In the areas of health and basic education, Brazil ranks 88th among 144 countries, falling nine positions since 2009.’

Since I joined the philanthropy and social investment sector almost two years ago after two decades in banking, I have heard of foreign organizations pulling investments from Brazil, because economic growth is playing an important role in reduction of poverty. But why? One can argue that consumption alone should not be used to define wealth. If we are marching towards a shortage of skilled labour because we are not improving education, it will be hard to sustain consumption over the next 10 years. And then what? Move back to a vicious cycle? This is all very hard to predict. If it was easy, predictions could create millions. But instead, we saw the major Brazilian companies Petrobras and Vale losing US$10 billion in value in 2012.

It will be interesting to see how this situation unfolds in the next 10 years. I hope the foreign organizations and investors have not pulled out too early. We are not sure yet whether Brazil will continue its pace of growth or if the economy is going to turn sour in the short run.

Elaine Smith is development manager at Instituto Geração.

Tagged in: basic needs Brazil Development Inequality

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