Brazil’s development in recent years has had a key positive side effect: a booming middle class. The growth of this segment could help drive consumption and, in turn, boost the country’s ETFs.
Brazil is one step closer to joining the ranks of developed nations: its middle class is growing. For a country long divided between a small, wealthy elite and a vast army of have-nots, it’s a positive development that many believed was a long shot just a few years ago.
Alibaba reports that the true definition of a middle class is hard to define. Brazil uses a five-tier system to classify population by money. The middle tier, called Class C, comprises those with household income between 1,115 and 4,807 reals per month ($641 to $2,763). This segment has ballooned to more than half the country’s total population.
The benefits of Brazil’s bigger middle class include:
- Programs have lifted 19 million people out of poverty and into this class
- They’re grabbing status symbols such as televisions and cars; new car sales jumped 20% in September
- The middle class can press for social change, improved schools and stronger political institutions
- They put a higher premium on citizens’ rights, such as multi-party elections and free speech
Mina Kimes for CNN Money reports that unemployment is down from its March peak, wages are up, and the Bovespa index, which tracks the country’s biggest stocks, has climbed 77% so far this year.
- iShares MSCI Brazil Index (NYSEArca: EWZ): up 92.6% year-to-date
- Market Vectors Brazil Small Cap (NYSEArca: BRF): up 64.5% since May inception
