Brazilians’ ‘fanatical’ travel to US helps drive Brazil’s economic boom

By Rachel Glickhouse, Christian Science Monitor, August 11, 2011
One of the most impressive results of Brazil’s economic rise has been the explosion of the middle class, and the expansion of what is called the C Class. Beyond the stock market, the oil fields, and the upcoming international events, the new middle class is what really has helped fuel growth and has attracted so much investment and international business.

In Brazil, socioeconomic level are divided by letters: A and B (upper income), C (middle income), D (lower middle income), and E (low income). This week, a new government study from the Strategic Affairs Secretariat (SAE) was released that provide insight into the new middle class, and provides an interesting look at Brazil’s biggest consumers.

The middle class now encompasses 52 percent of the Brazilian population, with around 95 million people. A new middle class family earns between 1,000 reais and 4,000 reais per month, or $615 and $2,461. The average monthly salary for a middle class family is 2,295 reais, around $1,412, which amounts to about $18,356 a year (including the “13th” bonus salary). Most are urban dwellers (89 percent live in cities) and largely concentrated in Brazil’s wealthier regions (the South, Southeast, and Central-West). The majority are adults (63 percent are over 25), and slightly more than half are female and white. Amongst those in the C Class, six out of ten are employed. Plus, the rise of women in the workplace and higher education levels have helped propel families into the C class.

Brazilians from the new middle class are spending record numbers on consumer goods and services, and are expected to spend $1.5 trillion in 2011. Shopping malls, which have become increasingly popular in the last few years, are mushrooming all over the country. Companies disappointed with zero growth in the US are expanding to Brazil where opportunities for new investments abound—particularly with middle class consumers.

So what are they buying? Just about everything. According to the study, the new middle class spends around 31.5 percent of their yearly budgets on expenses for the home, which include bills, repairs, and big purchases like TVs and computers. They spend about 23 percent of yearly budgets on services, including beauty salons, housekeepers, and government services. About 18.5 percent is spent on food and drink. A few other interesting numbers: the C Class is responsible for 48 percent of supermarket purchases and 60 percent of beauty salon expenditures; members of the C Class make up 70 percent of Brazilian credit card holders and 80 percent of Brazilians who access the Internet. For the new middle class, two of the main aspirations for purchases are cars and homes.

One of the most notable consumption trends in the new middle class is travel—now more than ever, Brazilians are going abroad and are spending billions. As the US Ambassador Thomas Shannon noted at the Council of the Americas conference in São Paulo this week, “Brazilians travel with almost fanatical zeal to the US.” In the first six months of 2011, Brazilians spent $10.2 billion abroad, an all-time record and a 44 percent increase from the same period the year before. This June alone, Brazilians spent $1.8 billion on international travel. Many travelers are coming to the US, much to the delight of embattled retailers. Miami is a popular shopping destination, and in 2010, 550,000 Brazilians visited the Florida city, spending $1.1 billion there. Some even come with actual shopping tours. Wealthy Brazilians are buying up Miami real estate; as one broker told The New York Times, “The Brazilians walk in, they don’t even negotiate…. It’s a no-brainer for them.”

But with this massive group of new consumers whipped up in a spending frenzy, debt is a real problem, and luckily the government is concerned. Ensuring education about credit and expanding unemployment insurance, amongst other measures, will be key in the sustainability of development, noted an EXAME article this week.

There are also American-style heath problems—as the middle class has grown, so have Brazilian girths: nearly half the population is overweight, and childhood obesity has more than quadrupled in the past two decades.