Francisco Soares, a 32-year-old Brasilia electrician, felt good about life two years ago when he started commuting in his first car, blasting the music and passing packed buses. Since then, bills started piling up, the cost of living jumped and last week he had to sell his wheels.
After a decade that saw 40 million people rise from poverty, Brazil’s middle class finds itself squeezed by faster inflation, rising debt and a weaker currency. Consumers are spending less at supermarkets and hairdressers as the classic weekend event, a prime cut barbecue, becomes a stretch for some. Continuing a wave of demonstrations sparked by increasing bus fares, protesters yesterday held the biggest march in two decades, halting traffic in Sao Paulo, attacking the state legislature in Rio de Janeiro and climbing on the roof of Congress in Brasilia.
The emerging middle class was the engine of economic growth and made the developing nation one of the world’s top five markets for cars and mobile phones. It also helped the Workers’ Party win its third straight presidential election in 2010. Now, as the dream of a new car and a trip to Disney World fades for some, so does support for President Dilma Rousseff. Asked whether he would vote for her again, as he did in 2010, Soares said: “No way.”
“The golden days are over, the feel-good factor is lost,” said Renato Fragelli, economics professor at the Fundacao Getulio Vargas, a business think tank in Rio de Janeiro. “It’s not that the middle class is disappearing but there’s been a setback, people feel they’re getting less for their money.”
After Latin America’s biggest economy expanded less than economists forecast for the past five quarters and inflation accelerated, the approval rating of Rousseff’s government fell eight percentage points in June from March, the first drop since she took office in January 2011, according to a Datafolha opinion survey published June 9. The poll interviewed 3,758 people June 6-7 and had a margin of error of plus or minus two percentage points.
Still, at 57 percent, Rousseff’s government support is 10 percentage points higher than in March 2011, according to Datafolha. The 65-year-old Rousseff remains the favorite to win the October 2014 presidential race, commanding 49 percent of voter intention, according to Datafolha. Marina Silva, a former environment minister who finished third in the 2010 presidential race, ranked second with 14 percent, while Aecio Neves, the candidate of the main opposition party, ranked third with 12 percent of voter intention.
While her backing fell in all regions and income classes, it dropped most among those earning more than 6,780 reais ($3,142) a month and living in the southern part of the country and least in the traditionally poor northeastern region.
The fact that Rousseff’s poll numbers have held up as well as they have in the face of slower growth and faster inflation is based on expanded social welfare programs and record low joblessness, said Andre Cesar, director at Sao Paulo-based consulting firm Prospectiva.
Unemployment, which hit an historic low in December at 4.6 percent, rose to 5.8 percent in April, still a record low for that month. Rousseff this month created an 18.7 billion reais subsidized credit line for beneficiaries of the government’s home-building program to buy refrigerators, stoves and furniture.
Rousseff’s press office declined by e-mail to comment on her approval rating.
In Brasilia, the mostly student protesters yesterday chanted “Dilma, what happened to the guerrilla fighter?” in reference to the president’s past as a member of the armed Marxist rebel movement during Brazil’s 1964 to 1985 military dictatorship.
“Peaceful protests are legitimate and a part of democracy,” Rousseff said in a statement posted on the presidential blog. “It’s normal for youth to protest.”
Demonstrators, voicing dissatisfaction on issues from inflation to poor schooling and corruption, blocked one of the main bridges across a highway in Sao Paulo. In Belo Horizonte thousands blocked an access road to the soccer stadium, one of several that Brazil is building or renovating to host next next year’s World Cup, at a cost of 7 billion reais. One protest sign said: “If your kid is sick, take him to a stadium.”
More than 215,000 people protested yesterday in 12 cities and the majority in Sao Paulo were not affiliated with any political party, according to newspaper Folha de S. Paulo.
The basic bus fare in Sao Paulo is 3.20 reais, a steep price for someone earning the minimum monthly wage of 678 reais.
“These young people have something to tell us,” Rousseff’s secretary-general, Gilberto Carvalho, said to reporters in Brasilia. “They’re showing us anguish. If their message reverberates, it’s because it reflects the desires of many people.”
Brazil’s gross domestic product expanded 0.9 percent last year, down from 2.7 percent in 2011 and 7.5 percent in 2010. Economists in the latest central bank survey forecast expansion of 2.49 percent this year. While that’s less than the 6.2 percent and 4.9 percent predicted for regional peers Peru and Chile, respectively, it’s more than the -0.08 percent estimate for Europe, according a Bloomberg survey of economists.
The Sao Paulo stock exchange has fallen 24 percent in dollar terms this year, the worst performer among 18 major indexes tracked by Bloomberg. The real lost 8.7 percent against the dollar over the last three months, the worst among 16 major currencies followed by Bloomberg.
Yields on Brazil’s dollar-denominated bonds this year through June 14 rose 106 basis points, compared with a 90 basis-point increase for all emerging markets, according to JP Morgan.
Another focus of Brazilians’ frustration has been the price of food, which rose through May at more than double the 6.5 percent pace of annual inflation. Tomatoes at one point jumped more than 100 percent, prompting a popular Italian restaurant in Sao Paulo to boycott the staple in protest of Rousseff’s economic policies.
“It affects low-income families most because food makes up a bigger share of their budget,” said Eulina Nunes, coordinator for inflation data at the government’s statistics agency, by telephone from Rio de Janeiro. “Inflation is perverse.”
At a supermarket in Vicente Pires, a working-class Brasilia suburb, Francisca Gomes, a domestic servant, picks up and then drops a bag of bell peppers after checking the price. She puts the cheaper squash in her shopping basket.
The 40-year-old maid said she can no longer afford a prime cut of beef, known as picanha, for special occasions.
“For us, it’s only second-rate meat now,” said Gomes, who earns the monthly minimum wage and still supports Rousseff.
Supermarket sales in April were down 5.6 percent from a year earlier, and retail sales expanded at half the rate forecast by economists surveyed by Bloomberg.
Tax breaks this year on electricity, basic foodstuffs and ethanol used in gasoline have provided little relief for household budgets, said 59-year-old Fontanelli dos Pasos, who earns around 3,000 reais per month as a chauffeur. His dream of taking the family to Disney World in Orlando, Florida is no longer an option, he said.
“It’s a warning to the government -- optimism on income and employment has fallen,” said Clesio Andrade, head of the National Transport Confederation, which last week published a poll that showed the Rousseff administration’s approval at 54.2 percent, down from 56.6 percent a year earlier. “Her popularity is still high but she can’t ignore these issues.”
The CNT polled 2,010 people June 1-5 and has a margin of error of plus or minus 2.2 percentage points.
The government has stepped up its fight against inflation, and food prices are already falling, Guido Mantega, who has been finance minister for more than seven years, said in an interview on June 12.
“Inflation bothers the population and also the government, that’s why we fight it,” Mantega said. Income continues to rise and consumers are not only buying electronic goods and food but also housing, with mortgage credit up more than 34 percent in 12 months, he said.
The share of income that households spend on servicing debt has doubled in seven years to a record 44 percent, leaving less disposable income. More than 15 percent of those polled in the CNT survey said they are at least three months overdue on one or more debt payments.
In addition to rising food and gasoline costs, the monthly debt payments and unforeseen health expenses for his 8-year-old daughter whacked his budget out of balance, Soares said.
“At first the installments weren’t a problem, then everything became more expensive and I couldn’t handle it anymore,” said Soares, who earns around 2,000 reais a month.
Instead of returning the car to the bank, he sold it to a used-car dealer who will continue paying his installments and thereby prevent him from getting a negative credit rating, he said, shoulders slumping.
“It was a short-lived dream,” he said.