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In Brazil's Favelas, a Middle Class Arises

The shantytowns attract major retailers

The night before appliance retailer Casas Bahia opened in Rio de Janeiro’s largest slum, resident Joana Darc de Morandi couldn’t sleep. Shopping list in hand, Joana was first in line to get in, seven hours before some 200 people began streaming through the store’s front door. “It’s very important for the neighborhood,” Morandi, 57, says of Rocinha, the slum where she lives. “Casas Bahia being here is a show. It’s beautiful. It means everything. You can find anything you need.”

Drawn by improved security, rising incomes, and a booming credit market, Brazil’s big retailers are opening shop in the favelas, the hillside shantytowns once viewed by most Brazilians as no-go areas. About 56 percent of the 12 million people who live in slums such as Rocinha were considered middle class in 2011, up from 29 percent in 2001, according to a study this year by Instituto Data Popular, a São Paulo-based research group. As reforms have taken hold over the last 10 years, the economy has created many more jobs than before, giving inhabitants of the favelas a chance to work. Unemployment in Brazil dropped to 5.3 percent in October, less than half the level a decade earlier. A stepped-up government aid program that paid the poor to keep their children in school, among other things, also boosted income. Today, Rio’s favelas have an economy worth 13 billion reais ($6.1 billion), according to the Data Popular study.