Class C and the Credit Crunch Crisis in Brazil

As noted frequently on this blog, recent years have seen the expansion of the middle class (Classe C) in Brazil. At the end of 2008, this “slice” has already totaled 53.8% of the population, according to research from the Getúlio Vargas Foundation (FGV), which, with a greater purchasing power, began to consume more and helped the Gross Domestic Product (GDP) Brazil to record a 3% growth over the past four years. But this Sunday (15), which saw the celebration of World Consumer Day, with credit tighter and unemployment on the rise, evidence seems to point to the fact the Brazilian is “tightening their belt.” And it is exactly this new C class being forced to make more adjustments in their spending. The consumption of durable goods within this class are seemingly increasingly competing with the basic household budget. In February, according to the Getúlio Vargas Foundation (FGV), the consumer confidence reached its lowest level since the survey began in 2005. “Lack of trust has influenced the pattern of consumption or habit that is Brazilian,” says Professor Mark Luppi, Retail Management Program (Sample), the Fundação Instituto de Administração (FIA). According to experts, the time to put the foot on the brake “on spending, the first things to cut within the budget are of greater value, where the purchase is greater dependence on financing”, especially where payment is in installments. Changes are likely to be reflected not only in the quantity but also relations to specific brands purchased – especially in non-durable goods. Some have argued that for the new class C that change does not come easily, arguing that as they created new habits, incorporating consumption, it is more difficult to abandon. If before they consume a premium brand, will look similar brands at cheaper prices. Other product areas likely to be hit may be where products are considered unnecessary: such as meals outside the home and leisure but also in areas such as telephony.

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