Brazil's Emerging Middle Class

In this article we aim to illustrate how the Brazilian economical classes look so that readers can see how the Brazilian middle class is fast becoming the biggest segment of the market. Historically Brazil had a reputation of having an extremely unequally distributed wealth, however along with the steady economical growth in this economical powerhouse, the middle class has also been growing. Today, it is fair to say that Brazil has a decently sized middle class and each year that passes, more and more Brazilians are entering the middle class and enjoy a higher purchasing power.

The Brazilian economical classes are segmented according to monthly household income levels as follows:

Class A&B: + 4807 R$
Class C : 1116 - 4807 R$
Class D: 804 - 1115 R$
Class E: Under 804 R$

Note: Since this article was written, the Brazilian economy has continued growing and the household income levels are now different. Please read more in the article "fastest growing economical segments in Brazil", written in September 2011.

As can be seen, class A & B make up the upper income classes; class C is the "official" middle class; class D constitutes the lower middle class and class E is the lowest income segment.

Along with the growing economy in Brazil, the last 5 years have led to significant changes in the distribution of wealth in Brazil. Please see the graphs below to see this amazing progress in Brazil. ( numbers in million )

Economical segments in Brazil year 2003

Economical segments in Brazil year 2008

As can be seen in the above graphs, the Brazilian middle class ( C ) has increased from 65,9 million to 91,8 million people in only 5 years during 2003 to 2008. This is a significant growth and is the main reason many people today are speaking of the "emerging middle class in Brazil".

At the same time, one can also see that the lowest income class E, has decreased from 49,3 million to only 30 million during the same 5 year time period.

At the end of 2008, the total amount of consumers in Brazil belong to class A, B and C, already made up no less than 111 million consumers.

What is the impact of the growing middle class in Brazil for Brazilian real estate investors?

One of the main advantages of investing in Brazilian real estate, is that it is one of the few markets where the domestic market is growing very fast while the price level for real estate in Brazil is still fairly low compared to the future demand. Along with a stronger domestic consumer market, it is realistic to expect:

- Higher prices for real estate in Brazil
- Stronger demand for vacation rentals in Brazil
- Higher rental prices for rental property in Brazil

These are only a few of the changes that the growing domestic market will have on the Brazilian property market.

In summary it can be said that whatever happens to the international market and demand for holiday homes in Brazil, the growing domestic consumer market in Brazil will ensure that property investors will see healthy profits and rental returns for their investment property in Brazil.