Beyond Carnaval: Is 109 million large enough?
Beyond Carnaval: Is 109 million large enough?
Concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
Welcome to I'm No Economist
I'm No Economist is a newsletter dedicated to deciphering Brazilian potential for global investment. Subscribe below to get it.
IN TODAY'S BEYOND CARNAVAL:
Historical growth and current size of Brazil's middle class
Characteristics and consumption behavior of Class C's consumer
The potential to explore this large Brazilian middle class demand and how it has been doing in other countries
Even though we are a team of innovation experts and entrepreneurs - not economists-, political and economic topics frequently arise as we explore Brazil's potential in the specialized content we create weekly.
In last week's edition of Beyond Carnaval, titled "Pessimism is an Ugly Addiction," Leo Torres examined how being bearish about Brazil is counterproductive and complacent. He highlighted reasons why Brazil can evolve into a developed society and, hopefully, shed the label of "developing country" once and for all.
Discussing this theme, during our weekly content planning meeting, we realized it was time to share more about the immense potential of Brazil's middle class and their increasing purchasing power, as the class analysis framework is still highly relevant for understanding Brazil's socioeconomic dynamics.
The Rise of the Brazilian "Middle Class"
109 million. Also known as Class C, this is the number of Brazilians belonging to the country's "middle class."
There is no single definition, but we can consider part of this group as having an average household income ranging between R$ 2,500.00 and R$ 4,500.00 (≈ USD 460 to USD 825). This represents more than 50% of our current 200 million population.
Historically, the Brazilian middle class has grown over the years and faced several phases, with significant events and trends shaping its development. These phases can be organized into three main groups:
Early Growth (1839-1913): Driven by the coffee export boom and local industrial development, this period was marked by relatively equal but low income levels.
Industrialization and Urbanization / Post-World War II (1913-1950): The country's industrial sector expanded, and urbanization accelerated. This period saw the rise of a new middle class, characterized by professionals, managers, and entrepreneurs who played key roles in the economy.
Recent Growth (2000s-2010s): Brazil experienced rapid economic growth fueled by increased formal employment, real wage growth, and large-scale social programs such as "Bolsa Família."
The rise of the Brazilian middle class has been a significant economic development in recent decades, driven by a combination of social policies, economic growth, and increased access to education and employment opportunities.This has brought many families from lower-income brackets to intermediate ones, resulting in a larger and more stable middle class.
The Power of a Large Middle Class
Getting straight to the point: a sizable middle class is vital for a country's economy as it propels consumer spending, which in turn drives economic growth.
Research conducted by Instituto Locomotiva in partnership with VR has revealed that Brazil's middle class (Class C) is defined by a young, well-educated, and predominantly urban demographic. They prioritize an improved quality of life, leading to increased spending on durable goods, branded products, e-commerce, and experiences. This shapes the country's consumer market and influences its economic expansion.
"Consumers in the middle and at the base of the economic pyramid have had to reinvent themselves in search of financial balance and expense control. These individuals are now more selective, with greater experience and access to information and more purchasing options and channels. This context is driving a more critical approach in evaluating cost-benefit, combining a demand for quality and affordable prices with special attention to ESG aspects," analyzes Renato Meirelles, president of the Locomotiva Institute.
The size and characteristics of the middle class vary significantly by country. However, in 2020, the global middle class spent $44 trillion, constituting 68% of the world's consumer expenditures. Expectations for continued growth in this consumer segment until 2031 are high.
Is The Global Market Ready for Brazilian Demand?
The middle class in the United States plays a significant role in driving demand for technology and automobiles. Similarly, in South Korea, middle-class families prioritize investing in education, resulting in a highly skilled workforce. Germany's robust middle class supports a thriving small and medium-sized enterprise sector, fostering entrepreneurship and innovation and contributing to economic vitality.
Brazil offers substantial opportunities for businesses and foreign investors across various sectors, much like other nations, due to its expansive middle class.
The crucial question remains: are foreigners companies and investors equipped to adapt to the changing behaviors and preferences of this sizable and fast-evolving consumer base?
Perhaps what's needed is a deeper understanding of Brazil's potential.
But remember, always do your own research, as this is not financial advice…
Sustainable energy seems to be a priority: The Brazilian Federal Senate approved a bill establishing the legal framework for the exploration of low-carbon hydrogen in Brazil. The bill creates fiscal and financial incentives to stimulate the low-carbon hydrogen fuel industry in Brazil.
Once again, Brazilians are getting the world: PicPay, a Brazilian fintech owned by J&F, is reportedly working with Citigroup to explore an initial public offering (IPO) in the United States.
Big deals in health: Dasa and Amil have created the second-largest hospital network in the country, combining 25 hospitals with 4,400 beds and a net revenue of R$9.9 billion. The joint venture is controlled 50% by each company, aiming to improve operations and reduce leverage.
How many trees are needed to create a textile? Suzano entered the textile market by acquiring 15% of Lenzing, a leading Austrian company, for €230 million. The deal marks Suzano's entry into the textile sector, which it believes can replicate its competitiveness in eucalyptus pulp.
🇧🇷 Brazil
Jun 11th
Annual Inflation Rate: Actual 3.93% | Previous 3.69%
Jun 19th
Interest Rate: Previous 10.5% | Expectation 10.5%
🇺🇸 US
Jun 12th
Interest Rate Decision: Actual 5.5% | Previous 5.5%
Annual Inflation CPI: Actual 3.3% | Previous 3.6%
Source: https://pt.tradingeconomics.com/
📩 Partner with I'm No Economist
Deciphering Brazilian potential. Generating expert intelligence and strategic insights for the Brazilian investment market.
Every Thursday 06:09 am (BR time), the Beyond Carnaval newsletter offers concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
Delivered on the first Saturday of the month at 06:09 am (BR time), the Open Zeitgeist newsletter provides a space for both Brazilian and "gringo" guests to share their perspectives on Brazilian investment opportunities.
Investors are closely looking for opportunities in our country. It is our job to decipher Brazilian potential.