This week’s Business Week features an article on the expanding Brazilian middle class.
Some quotes:
Just as important, though, is Brazil’s huge domestic market. While outsiders focus on the country’s shipments of iron ore, steel, and soy to China, exports are just 12% of Brazil’s $1.5 trillion economy. It’s the 190 million people and the fast-growing middle class—now more than half the population—that drive growth.
The country’s improving prospects create huge opportunities for entrepreneurs small and large. “Brazil has had so many crises over the years, people got used to them,” says David Neeleman, the founder of JetBlue, who last December started a low-cost Brazilian airline called Azul (Portuguese for “blue”). “I don’t think they’re at all fazed by this crisis—everyone seems to be focused on buying their first car, getting their first credit card.
A beauty salon in Rio de Janeiro highlights the new middle-class buying power. Despite its location in the posh Ipanema neighborhood, the clientele is mostly housemaids, hospital clerks, and other women from relatively modest circumstances. The salon is the creation of Heloisa Assis, known as Zica. One of 13 children, she grew up in a slum supported by her laundress mother. Like many Brazilians of African descent, she had brittle, kinky hair that she says hobbled her chances of getting a decent job. Zica tested homemade potions to tame her unruly Afro and finally came up with a formula that created flowing ringlets. She patented her discovery and in 1993 opened a salon, calling it Beleza Natural, or “Natural Beauty.” She soon had customers lining up at 5 a.m.
That revived auto sales, which in June hit 300,000 vehicles—an all-time high. Even hapless General Motors is enjoying fat times in Brazil, where it’s investing $1 billion through 2012 to develop a new small car. Whirlpool, which has a 40% share of Brazil’s appliance market, has benefited, too. Sales jumped 20% in May and June compared with a year earlier.
If you really want to understand the Brazilian middle class, you should visit with your wife one of the Beleza Natural beauty salons and talk with some women there, ask them about their job, what they earn, what their earning growth was the last years, how they see the Brazilian economy evolving,…
We wrote previously on the Brazilian middle class, but the below graph of Business Week summarizes it best: today, more than 51% of the Brazilian families earn between 616 and 2.579 US$ monthly, consider that Brazil counts 191.200.000 habitants and that the vast majority of the middle class is geographically concentraded in the zone Belo Horizonte - Rio de Janeiro – Curitiba – Porto Alegre, Sao Paulo and you realize what a massive buying power this represents.
The article refers to Whirlpool in Brazil (Brazilian brand name: Brastemp), which has a 40% share of Brazil’s appliance market and who’s biggest manufacturing plant is in Joinville. Sales of Whirlpool jumped 20% in May and June 2009 compared to the previous year which was already a record-breaker.
Neeleman’s Azul started flying end 2008, now has a 70% seat occupancy and expects profit for 2009.
Many people are now jumping on the MSCI Brazil (EWZ) bandwagon. We bought in early March and yielded a 47% rise, yet we took our profit last week and converted into BRF; more on this later.
