Until recently, Lucinelia de Jesus Souza’s future seemed bright, running a small coffee shop that caters to factory workers and other blue-collar customers in this industrial suburb of São Paulo.
But the faded pink counters of her shoebox-sized business, which opened a decade ago and blossomed as Brazil’s economy grew quickly, now see fewer customers stopping in for coffee or deep-fried pastries.
Her income has fallen by half since 2012, forcing the 43-year-old to cut the sort of spending that once heralded an emerging new consumer class in Latin America’s biggest country.
“It was false growth,” says Souza, summing up the outlook of many who feel let down by a lost promise. “People here are losing their jobs, they are fed up.”
After a commodities-fueled boom that allowed Brazil to finance ambitious poverty-reduction programmes and peaked with economic growth of 7.5% in 2010, Brazil is in its worst recession in nearly three decades.
During the boom years, tens of millions of Brazilians escaped poverty and became known as “the new middle class.” Their ability to buy items like cars and flat-screen TVs for the first time further fueled economic growth.
Now, they are struggling to hold on to hard-won gains and are rethinking everything from spending habits to political loyalties.
‘Where did it lead us?’
Unemployment is on the rise and inflation, running at an annual rate of 9.5%, is eroding purchasing power.
In São Bernardo do Campo, the cradle of Brazil’s auto industry, factories are downsizing. Over 12,000 jobs, equal to nearly 5% of the local workforce, disappeared between January and August, according to labor ministry data.
Combined with a massive corruption scandal at oil firm Petrobras and other state-run companies, the downturn has hammered the popularity of President Dilma Rousseff. Her single-digit approval ratings are the lowest of any Brazilian leader in decades.
It is even tarnishing the once-sterling legacy of Luiz Inacio Lula da Silva, Rousseff’s mentor and predecessor, who cut his political teeth as a São Bernardo do Campo union leader. As president during the boom, Lula introduced the easy credit that many Brazilian consumers binged on until the economy collapsed.
Changed expectations
As with the boom, the recession is playing out nationwide.
Many of the previous decade’s gains came for the new middle class, people who in more developed economies would be known as working poor - workers with a household income of between about $600 and $1,000 per month.
Although paltry compared with salaries in richer countries, it changed their long-term expectations.
Parents began enrolling their children in modest private schools and health plans. With many paying taxes for the first time, their demands for better government services and an end to corruption grew louder.
“These are not the same people they once were,” says Mauricio Prado, a partner with consulting firm Plano CDE, which tracks the behavior of lower-income Brazilians. “They are better-educated, healthier, transformed.”
The transformation was especially welcome in the northeast, a region so destitute that once it was best known for the millions of families, like Souza’s, that moved southward in search of prosperity.
But the local economy, where wages and economic growth outpaced the national average during the boom, is now shrinking.
Since the start of 2012, real wages across metropolitan Salvador have contracted 8.5%. Unemployment has spiked to 12.4%, well over the national rate of 7.6%.
With a wary eye on the future, Bastos says he will do whatever it takes to ensure his kids don’t face the same hardships he did: “I’ll sell my car, I’ll cut everything, but one thing I will always pay for is a good education for my children so they can continue to grow.”
