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The Brazilian Consumer Profile

One of the greatest attractions of Brazil is the large pool of consumers. Brazil currently has a population of nearly 190 million, and is projected to reach 195 million by 2010. Moreover, Brazil is a young country, with a median age of around 28. This is relatively low compared with the average age of around 37 in the US, 44 in Japan and 41 in Hong Kong. About 50% of its population falls into the 15-45 age group, which has the highest purchasing power and the greatest willingness to spend.

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Thanks to rising commodity prices and favourable fiscal and monetary policies by the Brazilian government, Brazilian households are earning higher incomes and spending more to improve their living standards. Over the period 2003-2007, the average gross income in Brazil increased by more than 124%. In addition, the “informal” economy is estimated to account for around 30% of the official GDP, though the Brazilian government adopted a new GDP methodology in March 2007 to take into account the contribution of the informal economic activities. Therefore, it is believed that the actual income level in Brazil is considerably higher than the aforesaid figures.

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In general, Brazilian consumers can be divided into seven social classes, namely A1, A2, B1, B2, C, D and E, according to their monthly income. It is estimated that the number of class C, B2 and B1 households grew by more than 50% from 14.5 million in 2000 to around 22.3 million in 2005, while class D and E households fell sharply to around 1.3 million between 2000 and 2005.

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Social classes B1 and B2, constituting over 20% of the households or 40 million inhabitants, are usually considered the middle class in Brazil1. The growing share of middle-class consumption presents a more promising picture for Hong Kong companies which have the strongest competitive edge in mid-to-high-end products. Furthermore, consumer credit has kept expanding in recent years, thanks to falling interest rates. As found in some consumer surveys, classes C, D and E consumers usually spend more than what they earn.

On the whole, housing is estimated to account for 21% of household expenditure in Brazil. Together with the 16% share of the food, beverages and tobacco, Brazilian consumers are estimated to spend some 70% of their income on goods and services. With higher incomes, Brazil’s demand for goods and services has been increasing quite steadily in recent years. Major goods and services of household expenditure include transport, household goods and services, communications, leisure and recreation, clothing and footwear, health goods and medical services, and education.

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Evidently, the increase in consumer spending is pushing up Brazil’s imports. Brazil’s total imports increased from US$56 billion in 2001 to US$121 billion in 2007, registering an increase of 116%. Although 70% of Brazil’s imports are raw materials and capital goods, the fast growth of the imports of consumption goods – 34% year-on-year in 2007 – in recent years is certainly worth noting.

1  The sizes of the middle class in Russia, India and China are estimated to be 30 million, 56 million and 200 million, respectively.

Content provided by Hong Kong Trade Development Council
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