Page last updated at 22:03 GMT, Monday, 17 September 2007 23:03 UK

Brazil sees middle class emerging

By Gary Duffy
BBC News, Sao Paulo

Housing in Brazil
Rich and poor live side-by-side in Brazil

There can be few more striking images of the inequality at the heart of Brazilian society than the favela or shanty town of Paraisopolis in Sao Paulo.

Right alongside this neighbourhood of narrow winding streets and homes built one on top of another, you can see the imposing high-rise homes of the rich of Morumbi, which sit behind fencing and security gates, reflecting the unease of their wealthy residents.

But if favelas have come to symbolise some of the greatest problems and challenges confronting Brazil, there may, in some areas at least, be signs of change as well.

Among the people of Paraisopolis, there appears to be a sense of optimism that this is a community that is making some progress towards a better life.

There is water and light in most homes now, which was not the case even five years ago, and buses run by the city of Sao Paulo now pass through the middle of the favela.

New life

Osmar Oliveira Alves came here to start a new life 30 years ago and now runs a grocery store that employs 16 people.

Brazilian shop
Many Brazilians are able to buy things they could never afford before

He has noticed a definite improvement in recent years.

"Salaries have improved a little and the quality of life as well," he says.

"Because we don't have inflation any more, it is easier to get credit and there are more opportunities to buy things.

"People are able to buy new fridges, televisions, microwaves. Some people have cars that are almost new. It is improving."

On the streets outside Osmar's shop, 26-year-old Gilberto Borges Batista, who has a job stacking shelves, agrees with this optimistic assessment.

"I have been in this job four years," he says.

"I had nothing, but now I have a DVD, a television, I have my house and I am also planning in the next two years to have my own little car. Thanks be to God."

Social integration

The Economist magazine recently identified what it described as a new lower middle class "emerging almost overnight" in Brazil and Latin America - millions of people who are "the main beneficiaries of the region's hard-won economic stability".

So it is possible for someone who was born poor to improve their living conditions and gain access to the middle class, and that makes Brazil a more normal country
Rogerio Schmitt, Tendencias Consultoria

There is little doubt that lower inflation has helped to improve the lives of many of Brazil's poorer citizens. In fact, much of the groundwork for this greater economic stability began before this government came to power.

Welfare support programmes such as Bolsa Familia and increases in the minimum wage have also made a difference. The government has further plans to raise the country's minimum wage another 7% in April 2008, from 370 reais a month ($193; £96) to 400 reais ($207; £104).

In a speech this month, marking Brazil's independence, President Luiz Inacio Lula da Silva said the country was experiencing a movement of social integration of an intensity never seen before.

"Poverty is declining, the president said. "In recent years, seven million Brazilians have joined the middle class."

"The best way for a country to grow is to ensure that more and more people leave poverty behind, enter the market and gain rights of citizenship."

Unsustainable situation

The challenge has been enormous, according to data from the Institute of Applied Economic Research (Ipea).

Bus in a favela
Buses run through the favelas these days

In 2003, 64 million people had an income that was less than half of the minimum wage, and while this had fallen in 2005 by around 7%, it represented more than 30% of the population, or 53.9 million people.

While the number of people living in extreme poverty (less than 25% of the minimum wage) reduced between 2003 and 2005, from 16% of the population to around 11%, this amounted to more than 20m people.

More recent data from the Brazilian National Statistics Institute (IBGE) brings encouraging news, with average incomes rising by 7.2% in 2006. The increase was biggest among the less well off, and in the north east.

Analyst Claudio Felisoni de Angelo of the University of Sao Paulo says while the situation has improved in the last five years, Brazil remains a deeply unequal society.

"One of the examples is that the best universities are public universities and the people that are able to get to the best universities are the people that are rich or the people in the middle class, the higher middle class."

He also sounds a note of caution.

"I think the situation is getting better, but it is not so strong," he says.

"The conditions of these people are dependent on the level of growth of the economy. In case we have difficulty in the economy in the future, we don't have the conditions to sustain this for a long time."

Mixed picture

Rogerio Schmitt, a political consultant at Tendencias Consultoria in Sao Paulo agrees that inequality is a striking feature of Brazilian society, and says it has been hardest to help the very poorest section of the population.

But he still regards the improvement in the lives of some of some of Brazil's poorer citizens as deeply significant.

"Brazilian society has always been a frozen society. People who were born poor, they would die poor, people who were born middle-class, they would die middle-class.

"That's beginning to change and this is probably one of the biggest social changes that we have had in Brazil since the end of slavery in the 19th Century.

"So it is possible for someone who was born poor to improve their living conditions and gain access to the middle class, and that makes Brazil a more normal country."

The picture is not consistent, and what may be a promising story in one favela is not true in all of them, or in some of the impoverished areas of the north-east of the country, currently battling a crisis in health services.

But nonetheless, it seems that for at least some of Brazil's poorest citizens, a door that was once firmly shut has finally eased open to let in a little light.

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