FEATURE-Brazil boom lifts millions into middle class

Thu Jul 10, 2008 8:03am EDT
By Stuart Grudgings
RIO DE JANEIRO, July 9 (Reuters) - Clearing a space among empty beer bottles, Paulo spreads out a glossy leaflet that envisions an urban development more reminiscent of Tokyo or Singapore than the Rio de Janeiro slum where he has lived for 50 years.
A pedestrian bridge with a sweeping arch is shown next to an azure swimming pool surrounded by palm trees. Nearby, a hospital and a sports center will rise, not far from hundreds of new apartments for residents now living in shacks perched on the hillside.
It is a different world to the daily life of the more than 1 million people living in Rio's slums, or favelas, who have long been left by government to fend for themselves, often caught between ruthless drug gangs and violent police tactics.
"We believe in it," said Paulo, a community leader in the Rocinha favela who, like many in the slums, did not want his real name used for fear of reprisals from drug gangs. He then sounded a note of skepticism about Brazil's government. "If they don't do it, then maybe they will suffer."
The Rocinha development, part of a $315 billion federal program aimed at improving the country's decrepit infrastructure, is one sign of how millions of poor are benefiting from an unprecedented period of economic growth in South America's largest economy.
The income of the poorest 10 percent of people grew by about 9 percent per year between 2001 and 2006, compared with 2 to 4 percent for richer people, according to the World Bank. The country still has some of the worst inequality in the world, but that is changing rapidly as tens of millions move out of danger of hunger and within reach of their first television, refrigerator or computer.
"It's more like it is booming up than trickling down," Deborah Wetzel, the World Bank's lead economist and head of poverty reduction and economic management for Brazil, said of the growth.
NOT FOR EVERYONE
Much of the progress has come in the past few years, helped by a family stipend program expanded by President Luiz Inacio Lula da Silva that ties welfare checks to school attendance and which is being copied around the world.
Yet for many in the remote countryside and the thousands of slums that surround big cities, the obstacles to a better life remain equally large -- terrible schools, high crime, discrimination, and skewed legal and tax systems.
A study by the government's Institute for Applied Economic Research showed that the richest 10 percent of Brazilians hold 75.4 percent of the wealth. Thanks to a regressive tax system, they only lose 22.7 percent of their incomes to tax, compared with 32.8 percent for the poorest 10 percent of Brazilians.
In Rio, only a handful of slums out of more than 600 in the city are in line for improvements under the federal program, leaving many feeling left out. Resistance from drug gangs who fear the works will threaten their trade has already led to delays.
"This growth is not for all the population," said Leriana Figueiredo, who works at a sports center funded by British group Fight For Peace in the Nova Holanda shantytown, which is not due any public works under the program.
"The majority here don't have jobs."
A short walk from the center on a recent night, armed youths were selling cocaine from street-side tables as openly as other stall owners were selling fruit.
COMPANIES MOVE IN
Rocinha, often called South America's largest slum, is in many ways the Hilton of Rio's shanty-towns with at least 8 banks and a slew of foreign aid groups. The stability is deceptive, owing more to the firm grip of one of Rio's most powerful drug gangs than the presence of the state, but the effect of the country's economic growth can be seen in its bustling streets and stores.
Mexico's Banco Azteca, owned by tycoon Ricardo Salinas, plans a branch in Rocinha after starting Brazil operations this year in the northeast targeting low-income savers. Customers can use fingerprint technology to get around literacy problems and open an account with as little as $3.
Outside a Casas Bahia store in downtown Rio, 27-year-old Nara Macedo Moreira said on a recent afternoon that her monthly income of just 600 reais ($375) had not held her back from buying a flat-screen television and a DVD player.
"I'm furnishing my whole house this way," said Moreira, who was visiting the store to pay her latest installment. Next on her shopping list was a computer.
But it is still alienation that defines much of life in the thousands of lawless slums that surround big cities, despite national unemployment near record lows.
Most children in Nova Holanda drop out of school at around 12 or 13, Figueiredo said, leaving them with little chance in the job market and vulnerable to being tempted into drug gangs that offer quick money and status. Discrimination against slum dwellers, many of whom are black, is another economic barrier. Many job seekers from poor areas give false addresses when applying for positions.
Two young workers at the boxing project, Bruno Silva and Carol Belo, both had hopes of getting to college one day but felt they had been held back by poorly-funded schools compared to the ones attended by middle-class children. They said books were often missing sections and were so scarce that students had to photocopy one chapter at a time.
"I need to take an entrance test but I don't see the point," said Belo, who wanted to take administration and social studies. "I have too many weaknesses." (For a factbox on Brazil's new middle class, click on [ID:N08299872]) (Reporting by Stuart Grudgings; Editing by Eddie Evans)