Brazilians’ Consumer Dream: Paying the Bills

Brazilians' Consumer Dream: Paying the Bills

A survey by the Brazilian Publicity Association shows that Brazilians
are more worried about
paying their bills than interested in buying
the latest car model. The study heard people in the cities of

São Paulo, Rio de Janeiro, Porto Alegre, and Recife.
Consumers are also interested in education and culture.


Brazilians’ dreams of consumption have become more realistic. Their priorities are no longer to buy this year’s
latest automobile model, but to pay outstanding bills, to manage their domestic accounts in the short term. This was the
finding of a study just conducted by the Marketing Agency consulting firm in four large Brazilian cities.

"The population is acquiring more realistic goals," affirmed Rafael Sampaio, vice president of the Brazilian
Publicity Association, at a seminar entitled "Consumer Dreams during a period of Change," held at the American Chamber of
Commerce. According to Sampaio, this change reflects a reaction to economic problems that have occurred in recent
years. "Consumption has not diminished, but consumers have changed their buying habits in terms of traditional brands," he

Sampaio said that consumers are no longer tied to brand names, but to the overall set of services that accompany the
product. He remarked that "This doesn’t mean the end of selling dreams. But the fact is that people are trying to adjust their
aspirations to their daily necessities," he added

According to Sampaio, the survey, which included 1300 members of the middle class in the cities of São Paulo, Rio
de Janeiro, Porto Alegre, and Recife, indicates that consumers are insisting on greater honesty by sellers of products and
services and that, on their list of consumer dreams, right behind the payment of bills comes the need for education and culture to
do a better job in managing expenses.

Lower Tax

Brazilian Union leaders, representatives of automobile manufacturers, and the government reached an agreement
earlier this month to reduce the IPI (Industrial Production Tax) on automobiles with motors of up to 2000 cubic centimeters
(inexpensive and medium-priced cars). This measure is to stimulate the sales of cars piled up on factory loading yards and
to maintain jobs in the sector until November 30.

To compensate for taxes already charged on 100 thousand cars that have been moved to automobile dealerships,
manufacturers will be freed from transferring an additional 1 percent of the IPI (which would amount to a total of 4 percent)
per month to the government, until October. The government will be giving up a total of R$ 342 million (US$ 114 million).

Although for automobile buyers the reduction in the IPI comes to 3 percent, from the point of view of tax collection
the IPI for medium-priced cars will fall from 15 percent to 11 percent in the first three months, after which it will be set at
12 percent.

Cars that use alcohol or either alcohol or gasoline as fuel (the so-called "flexible cars"), will have their IPI reduced
from 13 percent to 9 percent, until October, after which the IPI will be set at 10 percent.

Inexpensive cars, which pay an IPI of 9 percent, will be benefited by a reduction to 5 percent during the first 3
months, after which a rate of 6 percent will prevail.

"Manufacturers have a clear commitment to maintain jobs during this period. From then on, life goes on.
Entrepreneurs and workers will continue to debate this question, in which the government should not intervene," said the Minister of
Finance, Antônio Palocci, when he announced the measure.

Palocci also refuted criticisms that the automobile industry is the only one that has been benefited, over a long
period of time, by various Administrations, through reductions in the IPI.

Palocci affirmed that the Administration has programs to reduce taxes for dozens of industrial and productive
sectors in the country. In his view, it is always up to the government to analyze demands that can produce positive results for
the dynamism of the economy, without distortions.

The president of the ABC Metalworkers Union, José Lopes Feijó, also made a point of stressing the difference
between this agreement and past ones, since, according to him, a commission will monitor the results monthly. "For us this is a
step in the right direction, since, in the past, many agreements were established and abandoned, without any type of follow-up."

The Minister of Labor, Jaques Wagner, said that the announcement of these measures shows that the government is
doing its part and is convinced that workers and entrepreneurs will assume their responsibilities to the same ends, both in the
reduction of prices and the maintenance of jobs.

Paulo Pereira da Silva, "Paulinho," president of the Union Force, said he was pleased with the job guarantees, as
well as with the fact that the measure announced by the government "is the first concrete step that the government has taken
as far as jobs are concerned." He also recalled that each job lost in the automobile industry leads to the loss of other jobs
in the productive chain.

He was not the only one who commemorated the measure. The president of the Anfavea (National Association of
Automobile Manufacturers), Ricardo Carvalho, even though he recognized that the agreement was signed on an emergency
basis and will last for only a short period, said that the measure comes at the right time, and he promised to carry out his
commitments to the government to increase sales and maintain jobs.

Real Sales Up

The real sales (discounting inflation) of São Paulo’s industries increased 4.9 percent in July. On the other hand, the
index of the Level of Activity (INA) of industry in São Paulo remained stable in July, compared with June. According to
Clarice Messer, director of the Department of Economic Studies and Research at the Industrial Federation of São Paulo (Fiesp),
the growth of real sales by industrial firms in São Paulo in July opens the way for a gradual recovery in industrial production.

"The real sales results were very encouraging, in comparison with previous months, and this allows us to forecast
that, in the months to come, production increases will accompany the increase in sales," Messner declared.

The cumulative INA index between January to July has declined 1.1 percent, while real sales managed a small
upward move (0.2 percent). The sector that presented the best performance in July was that of transportation equipment, with an
increase of 6.4 percent. The textile sector did worst, falling 4.4 percent.

Unemployment Up

Industrial employment fell 0.1 percent in June, compared to May, according to the results of the monthly survey
conducted by the IBGE (Brazilian Institute of Geography and Statistics). This was the fifth consecutive decline in the
statistical series compiled without taking into account seasonal variations. Including this result, there was a 1.3 percent reduction
in industrial employment over the course of the first half of the year. In comparison with June, 2002, the decline amounted
to 0.6 percent, as the result of reductions observed in nine of the 14 areas included in the survey and in 11 of the 18 sectors

Also according to the Monthly Industrial Survey of Jobs and Salaries, the payroll of workers in the industrial sector
registered an increase of 1.8 percent in June, in comparison with May, disregarding seasonal influences. However, in comparison
with June, 2002, there was a real loss of 4.6 percent, and the cumulative loss since the beginning of the year amounts to 6.4
percent. Over the last 12 months, the reduction stands at 4.5 percent.


The material for this article was supplied by Agência Brasil (AB), the official press agency of the Brazilian
government. Comments are welcome at

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