Brazil's midddle class tightens belt ahead of elections

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SME Times News Bureau | 30 Sep, 2014
Middle-class Brazilians are keeping a tight hold on their purse strings due to rising prices and an uncertain economic future, precisely at a time when the political balance may shift in next Sunday's presidential elections.

Fear of a change to a more restrictive economic cycle has forced many Brazilians to moderate their expenses, unlike in their free-spending past, several experts told Spanish news agency EFE.

The consumption slowdown mainly affects what is called class C, consisting of the 100 million Brazilians (equal to just over half the country's population) with a monthly per capita income ranging from 320 reals ($130) to 1,120 reals ($500).

Scarcely a decade ago, one-third of this new middle-class, at least 30 million people, lived in poverty and benefitted from the income re-distribution programmes of then president Luiz Inacio Lula de Silva and his successor and political granddaughter Dilma Rouseff, who aspires for a second term in office Sunday.

The surveys indicate that with Rouseff considered the clear favourite among the poorest Brazilians, and her main rival, ecologist Marina Silva, leading among the wealthy, it will be the middle class that will decide the future head of state.

A week before the presidential elections, all surveys indicate that Rouseff and Silva will be the most-voted candidates, but also that neither will exceed the 50 percent required for a first-round victory.

Accordingly, they will have their definitive showdown held three weeks later, Oct 26, in which the current president seems to be the favourite, but with a very small margin of advantage.

The experts consulted by Efe said the spending slowdown among C-class Brazilians not only sets off alarms in a country in which domestic consumption is one of the main drivers of the economy, but does so at the moment when the country's future is being decided.

Head of the Rio de Janeiro Confederation of Commerce (Fecomercio), Christian Travassos told Efe that "decelerating consumption in the middle class is in tune with several indicators, such as inflation, which is around 6.5 percent as versus the 4.5 percent anticipated by the Central Bank, and greater consumer mistrust".

Other indicators, such as low salaries and heavy indebtedness of families with lower income, complete the picture.

"A part of the middle class is facing great difficulties in paying off the debts it incurred, and that is another factor that explains the decline in household spending over the past few months," Travassos said.