Class C will grow less in this Lula government than in previous ones, says research

A survey published this weekend points out that, in the coming years, Brazil will not see a phenomenon similar to the expansion of the middle class witnessed in the first two terms of President Luiz Inácio Lula da Silva (PT), when there was an advance in the D/ And for C.

This time, those who will come out ahead will be the highest strata of society, especially class A, according to a projection by Tendências Consultoria released by Newspaper. This is due to an economic situation marked by high interest rates, low economic dynamism and limitations in the public budget for income redistribution policies.

According to the consultancy, class A will experience the greatest increase in real income, with an average growth of 3.9% per year in the period from 2024 to 2028 – a movement that has already been felt in 2023. On the other hand, class class D/E, made up of the lowest strata of the population, will experience considerably more modest growth, of just 1.5% per year, on average.

Among them, says Tendências, class C – a major beneficiary of the Lula 1st and 2nd governments – will see an increase of 2.5%, while class B will advance 3.5%.

Although class A is relatively small in terms of number of households, representing only 4% of the total, it holds a significant share of national income, around 37.2%. On the other hand, class D/E, which represents almost half of Brazilian families, receives only 22.1% of total income.

The mass of income encompasses several components, such as income from work, transfers from social programs such as Bolsa Família, social security benefits, as well as other sources such as interest and dividends. The difference will be precisely the capital gains of the richest, such as businesspeople or individuals with investments.

Although there are expectations of a reduction in the basic interest rate, the Selic, currently at 10.75% per year, is expected to remain at relatively high levels. The Central Bank’s latest Focus Report, released last week, points to a forecast of 9% for the end of this year.

This perspective has worsened recently with the possibility that the United States, due to high inflation, will keep its interest rates high for longer, which could pressure emerging countries like Brazil to keep their own rates high to attract investors.

Currently, it is possible to obtain a return of 6% per year above inflation with conservative financial investments in Brazil. In contrast, in 2023, spending on interest on Brazilian public debt totaled R$718.3 billion, while Bolsa Família allocated just R$170 billion to 21.1 million homes.

With regard to class D/E, the Tendências consultancy does not expect significant corrections in the coming years in social programs such as Bolsa Família or in the minimum wage, given the fiscal limitations that the Lula 3 government faces.

This reality marks a reversal of what was observed between 2003 and 2010, when Brazil benefited from structural reforms under the government of Fernando Henrique Cardoso (PSDB), a period of strong global growth and a “boom” in the prices of commodities exported by the country. .