Favela consumer class on the rise in Brazil

Brazil's favelas, or slums, are home to a growing consumer class whose purchasing power has risen due to a jump in salaries, a decrease in unemployment, and greater access to education.

• A version of this post ran on the author's blog, Riogringa. The views expressed are the author's own.

With the expansion of Brazil's middle class, something has become increasingly clear: favelas are home to a vast and growing number of consumers. Though this was apparent to companies like Coca Cola and Nestlé over a decade ago, the purchasing power of favela residents has risen due to a jump in salaries, a decrease in unemployment, and greater access to education.

Brazil's so-called "C class" grew by 50 percent in urban favelas over the last decade, according to a new Data Popular study. Now, around 65 percent of favela residents are considered middle class, versus 37 percent in 2002. Brazilian favela residents – around 12 million people – earn around $28.4 billion a year, the equivalent of Bolivia's GDP.

"This used to be an invisible market, because it was right under our noses," says Data Popular Director Renato Meireilles, "but people only saw favelas through the perspective of violence and drug trafficking."

Over the last ten years, access to goods for favela residents has exploded. The number of those with washing machines doubled to over 50 percent. Nearly 90 percent have cell phones, and 40 percent have computers. Around 45 percent are regular internet users. While most daily purchases are made within favelas, larger purchases, like electronics, are made in stores outside the community. About 70 percent of favela residents go to the mall every week, and 50 percent eat out on a weekly basis. Around half said they plan to buy furniture within the next year, and 36 percent plan to buy home appliances.

Some companies have taken note. Casas Bahia, one of the country's largest retailers, opened a store in Rio's Rocinha in November. On opening day, the store sold 10 times as much as the average store, and the chain plans to open a third favela location in 2013. Vai Voando, an airfare vendor, has 70 stores in favelas alone, largely in Rio and São Paulo. The company counts around 3,000 passengers a month, with 43,000 customers since the company started two years ago. The company's owner, Tomas Rabe, plans to open 50 more stores this year.

Now, plans are underway to build Rio's first favela mall, in the "pacified" Complexo do Alemão. The $10 million investment aims to open 500 stores, at least 60 percent of which will be run by local favela residents. All maintenance, security, and janitorial work will also be done by locals in order to create jobs, especially for youth. A branch of Caixa Econômica bank will offer microcredits for small businesses within the mall itself. The mall also plans to house local street vendors. The project is due for completion later this year. Elias Tergilene, a former street vendor who runs a series of malls, is behind the initiative. He hopes to invest $253 million over two years in favela malls, aiming to open similar shopping centers in São Paulo and Belo Horizonte.

However, not everyone is happy about the new favela consumers, who along with buying computers and washing machines are also frequenting some of the same public spaces once reserved for the wealthy.

"The C class put an end to the exclusivity of the A class in that the new middle class began to consume products and services that it didn't buy before," Meireilles told me in November. His company found that around 50 percent of upper class consumers only want to be around people from their social class, and over half believe that products should come in different versions for the rich and the poor.

A salient example of this recently emerged in Rio. A new beach club in Copacabana opened, offering a private strip of sand on one of the city's public beaches. For an entrance fee of between $45 and $126, beachgoers can get into the exclusive club – where safety and a clear separation from so-called favelados (favela residents) are considered selling points. "I stopped going to Ipanema and started coming here every day because it's a much more select crowd," sociologist Camilia Diniz told VEJA. "I can drink champagne out of a glass and brush my hair afer swimming." The manager of the beach club noted: "Everyone can come here without being afraid of wearing a Rolex or bringing a Louis Vuitton bag."

– Rachel Glickhouse is the author of the blog Riogringa.com.