ITAU UNIBANCO Equity Strategy: Riche Comme un Brésilien
The expression “riche comme un Argentin” became popular in Paris, at the end of the 18th century, and continued to be used until the early 1930s. The phrase was generally used to describe any wealthy individual, suggesting he or she was as rich as an Argentine—this was seen as a standard of prosperity and opulence at the time. A hundred years later, the expression has definitely lost its meaning, but we believe that it exemplifies the massive transformation in income inequality, income distribution and consumption that is currently taking place in Brazil, where the number of individuals that make up the A, B and C classes has grown over 30% since 2003, while the D and E classes have been reduced by half.
Brazilians are becoming wealthier, with access to new credit instruments, which has led to changes in their consumption profiles as indicated in recent publications from the Central Bank, the FGV and several other think tanks. More importantly, this is happening at the same time that Brazilians are climbing the economic ladder. These new consumption profiles have been exhaustively analyzed in this week’s long-awaited household budget survey (the so-called “POF”, the acronym in Portuguese) from the government’s statistics institute, the IBGE. The POF is the most comprehensive survey produced in this field in Brazil, and had last been updated in 2003. Our consumer analysts will most likely follow up with interesting readings from the latest POF, but, broadly speaking, it has confirmed that income inequality has continued to decline.
In spite of a GINI coefficient that remains outrageously high, at 0.5431, the trend is clearly favorable, particularly in the past decade, which reversed some of the damage from several decades of hyper-inflation and worsening income distribution. According to this week’s IBGE statistics, the monthly spending of wealthy families remains 9.6x higher than the average monthly spending of poor families (from 10.1x in 2003), which suggests Brazil still has quite a long way to go, in spite of the recent advances made on that front.