The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
Since 2002, Brazil has enjoyed a period of sustained economic growth. Consumer incomes have risen across the board, amid stronger growth with low inflation, which has boosted real wages. There has also been increased government support for low-income earners under President Lula da Silva. The result has been a sharp increase in consumption and retail demand.
The emergence of a new lower middle class in Brazil with growing disposable incomes and easier access to credit offers abundant potential for retailers. Yet income distribution in Brazil remains one of the most highly unequal in the world and it will take several more years of sustained real growth (and proactive government policies) to reduce these disparities. As the size of the middle class expands exponentially, retailers can expect a sustained boom in the new mass consumer market in Brazil.
Brazilian household incomes fell sharply from the mid-1990s, owing to a series of economic crises that resulted in recession. However, since 2002/2003, they have recovered steadily, thanks to stable economic growth with declining inflation and interest rates, which has helped to lift real wages. Credit has also become more readily available. Additionally, above inflation hikes to the minimum wage and increased government support for low-income households have helped boost earnings and reduce poverty.
Source: Euromonitor International from National Statistics.
However, notwithstanding an appreciable improvement in incomes among the lower and middle classes, the overall distribution of national income in Brazil remains extremely uneven:
As a result, the gap between the poorest and richest segments of the population remains stark:
In line with this, Brazil’s GINI-co-efficient, which measures the equality of income distribution (0= perfect equality, 1=perfect inequality), remains stubbornly high.
|Evolution of earnings equality: 1996-2006|
|Source: Euromonitor International from National Statistics|
The good news for Brazilian retailers and investors is that even a small rise in household incomes leads to increased consumption of goods and services:
A steady increase in the availability of credit and cheap financing deals (in line with lower inflation and interest rates and a more confident banking sector) has encouraged increased consumption of non-essential goods, in particular durable goods like household furniture and electrical appliances:
Rising numbers of households with higher incomes have boosted consumer spending and domestic demand, supporting higher economic growth and encouraging additional investment:
Brazil’s macroeconomic prospects are good and real GDP growth will increasingly be driven by stronger domestic demand:
As domestic demand expands, businesses will continue to benefit from rising household incomes and faster consumer spending.
While household disposable incomes will continue to grow, the middle class in Brazil will remain proportionally smaller than in neighbouring countries:
However, by virtue of its large size ¬– it is by far the most populous country in Latin America ¬– and its young population (mean age 29.4 in 2006), Brazil is one of the most attractive new consumer markets in the world:
This makes it an essential destination for global companies keen to grab a slice of the rapidly emerging domestic market.