Business & Economy

Inequality worsens in Brazil as elites concentrate more and more wealth

By Carlos Meneses

São Paulo, Brazil, Jan 20 (EFE).- The wealth of Brazil’s elite is growing three times faster than that of the general population. Such a surge has not been seen since the military dictatorship (1964-1985) and defies President Luiz Inácio Lula da Silva’s goal of fighting inequality.

Brazil is one of the most unequal countries in the world, with luxury apartments built a few meters from poor slums, known as favelas, where drug traffickers rule.

This is the case in Paraisópolis, the second largest favela in São Paulo. On one side, a hive of bare brick houses; on the other, imposing apartment buildings with tennis courts and swimming pools on every terrace. An avenue separates the two worlds.

Inequality has been a chronic problem in the south American giant that had stabilized in the early years of the 21st century with an improvement in the living conditions of the poorest, but then reversed between 2017 and 2022. This is the conclusion of a study published this week by the Fiscal Policy Observatory of the Getúlio Vargas Foundation.

The results, based on a preliminary analysis of data from income tax returns, paint a discouraging picture: the concentration of wealth at the top of the social pyramid reached a record high between 2017 and 2022, the period in which the conservative Michel Temer and the far-right Jair Bolsonaro governed.

The inequality gap in numbers

According to the report, the richest 0.1% is made up of 153,666 Brazilians who almost doubled their income in that period, reaching an average monthly salary of 440,000 reais (about $90,000).

Meanwhile, 95% of the population, equivalent to 147 million people, reached 2,300 reais ($465) per month at the end of the period, with a growth of 33%, slightly above inflation, which was around 30%.

“There has been a very strong increase in the concentration of wealth. This is perhaps the first major episode of increased inequality since the dictatorship,” Sérgio Gobetti, author of the study and economist at the Institute for Applied Economic Studies, told EFE.

This phenomenon is confirmed by the Brazilian luxury goods sector, whose sales have skyrocketed in recent years.In 2022, sales amounted to almost 75 billion reais ($15 billion at the current exchange rate), according to a report by the consulting firm Bain & Company, published by the newspaper Valor Econômico.

“Projections indicate that in 2023 sales will increase by 30%,” Roberto Veiga, marketing director of Agência LUX, which specializes in the luxury market, told EFE.

Brazil is now competing with Mexico to be the Latin American country with the greatest activity in this exclusive sector.

“In ten years, the number of billionaires in Brazil has doubled,” said Veiga, pointing to the enormous growth of the agribusiness sector, which has led to a boom in conspicuous consumption in states such as Goiás, in the central part of the country, where houses valued at 10 million dollars can be found.

What are the underlying factors?

According to Gobetti, there are structural and circumstantial factors behind the rise in inequality in this country of more than 200 million people.

Among them, he cites the reaction of corporations to a bill advancing in Congress that would tax profits and dividends, which are currently exempt from income tax.

This proposal is stalled in Parliament, but the companies, fearing that it would go ahead, from 2021 onwards distributed the maximum possible dividends to their partners, thus increasing their wealth.

At the same time, the Covid pandemic wreaked havoc on the economy, where 40% of the workforce was in the informal sector, and homelessness has increased. In 2022, according to official data, there were 281,472 homeless people in Brazil.

In addition, there is a series of tax breaks in Brazilian legislation that favor certain sectors, such as agriculture and cattle farming.

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