Subway, Salad, Soccer Protests in Brazil

Brazilian President Dilma Rousseff’s administration is having a hard time making sense of the protests erupting across the country in recent days.  

Brazilian President Dilma Rousseff's administration is having a hard time making sense of the protests erupting across the country.

A couple of things are clear. Rousseff must come to terms with the end of a period of nearly boundless popularity. And she must contend with a new middle class that feels politically empowered but squeezed by the rising cost of living in Latin America's largest economy.

More than 250,000 people took to the streets in cities across the country on Monday and Tuesday, primarily to denounce a 7 percent increase in subway and bus fares, along with a host of other grievances. The uprising has been called the Revolta da Salada, or "salad movement," by some after a reporter was arrested for carrying vinegar to combat tear gas. Protesters blocked streets, burned things and even climbed atop the National Congress building to vent.

Protesters walk during demonstrations in Sao Paulo, Brazil, on Tuesday, June 18, 2013. Photographer: Marcos Issa/Bloomberg

On Tuesday, Brazil's Folha de Sao Paulo newspaper quoted Gilberto Carvalho, Rousseff's secretary general, saying: "It would be presumptuous to say we understand what's happening.... These are new ways of mobilizing, which for us, of the generation of the 70's, 80's and 90's is unknown."

Indeed, times have changed since Rousseff's days as a socialist youth. Almost 40 million Brazilians have joined the middle class in the last several years. The advent of social media services such as Facebook and Twitter makes organization easier and leadership more diffuse. Pollster Datafolha noted that 84 percent of protesters lacked specific party affiliation, more than half were 25 years old or younger and 22 percent were students.

Some see an achievement in the movement's apparent lack of focus or leadership. As Marcelo Rubens Paiva, a blogger for newspaper O Estadao de Sao Paulo put it, "The great political victory is that each person represents itself, with different desires and demands."

Still, the message of these young people should be familiar to Rousseff's leftist colleagues. The Free Fare Movement, which helped spark the protests, considers "urban mobility as a fundamental right for everyone." The movement's demands for free transportation was an idea initially conceived by Rousseff's own Workers' Party. But Vladimir Safatle, a leftist columnist at Folha, warns these are measures that Rousseff "now doesn't have the courage to adopt," adding that for the protesters it is "righteous to denounce the absence of efficient public policy."

Brazil's economic troubles help explain the growing frustration. Last year the economy grew a mere 0.9 percent, a fraction of the 2.7 percent gross domestic product growth in 2011. While Brazil's unemployment rate of 5.8 percent in April was modest compared to that of a really troubled nation like Spain, it is rising. Better access to financing has left the middle class saddled with debt: Households are now spending 44 percent of their incomes servicing debt. Plus, prices for all kinds of goods continue to climb. Inflation sits at an annual 6.5 percent, near its highest level in almost two years. On April 12, Brazil's Epoca magazine featured a squished tomato on its cover and noted that the vegetable has more than doubled in price in the last year. More expensive transportation seemed to be the straw that broke the camel's back -- just a bill too much for struggling Brazilians.

Congress is now considering cutting taxes on transportation. Lindbergh Farias, the lawmaker leading the change told Folha such cuts could mean "a 15 percent reduction in fares." In a country known for its high-tax culture, Rousseff has already slashed taxes on a number of services over the past 18 months, including electricity, in a bid to make business and everyday life less expensive. On Monday, she reasonedduring a televised speech, that the protesters are "people who want more and are entitled to more ... better health, education and more opportunities."

So far, Rousseff has been rewarded for her efforts. Since she came to office in January 2011, she has maintained high levels of popularity, but this is changing -- fast. A poll by Datafolha put her approval ratings at 57 percent in early June, down from 65 percent in March. This means her re-election next year may not be quite the done deal it was once thought to be.

Another problem is that Rousseff is resorting to more government spending to shore up political support. This month, she unveiled a $8.6 billion subsidized line of credit Brazilians can use to equip their homes with items such as refrigerators and stoves. Nearly 19,000 people signed up for the home improvement program just six days after it was announced. The political objective of such program is clear, but the actual economic benefit is doubtful at best.

Other disruptions have broken outat the Confederations Cup soccer tournament -- where Rousseff was booed at the opening ceremony on June 15. The protests, which have become Brazil's analogue to the Occupy Wall Street movement, are largely taking issue with the FIFA 2014 World Cup. The country is sinking $3.3 billion into 12 soccer stadiums for the event, far over budget and triple what South Africa spent on readying its own venues for the 2010 tournament. Only a profound dissatisfaction with poor education and health services as well as high crime rates can explain why soccer-loving Brazilians would denounce the national pastime. A video titled "No, I am not going to the World Cup," in which Brazilian Carla Dauden criticizes the country's focus on the game, has garnered more than 1.6 million views on YouTube since it was posted on Monday.

An editorialin Folha the following day drove the point home: "More consumption will be only a temporary relief, at the expense of greater debt for families.... More consumption and more soccer won't solve anything."

(Raul Gallegos is the Latin American correspondent for the World View blog. Follow him on Twitter.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.