Baby Boom  &  Budget Bust 

A chance combination of prosperity, ticking biological
clocks and the search for family values and intimacy is keeping Brazilian
maternities, baby sitters and child product manufacturers very busy these
days. With inflation unbelievably low (by Brazilian standards), many couples
are finally considering the big jump to baby land. Simply put, it’s boom
time for babies. But there many other people crying and is not from teething. 

Rodolfo Espinoza 

They are being called the children of Real. They are the boys and girls
born in the last few years who are reaping the fruits of the Real, the
new currency and economic plan implemented July 1994. More specifically,
children of Real are those babies who arguably owe their existence to the
Real Plan, since their parents decided to have them only because of the
new perspectives and opportunities presented by the Real. And it seems
that there are plenty of these children of Real. So much so that there
is talk of a new baby boom in the country 

Newborn Antônio Franco is a legitimate representative of this
generation. He is the son of Cristiana and Gustavo Franco, one of the Real’s
fathers and the Central Bank’s Director for International Affairs. If not
diplomatically, the old Franco has colorfully and irreverently explained
the relationship between the economy and the current baby boom: “I
have no doubt that inflation was one of the causes of impotency in Brazilian
homes. It’s good to know that the Real has induced a national hard-on.”
He makes a strong case. For decades, Brazilians, living with a monthly
inflation rate of around 50 percent, couldn’t seriously budget for a year
in advance much less for nearly two decades that it takes to raise a child. 

There is no lack of signs that it’s boom time for middle-class newborns.
The evidence can be seen in the maternity wards for the well-to-do in Rio,
São Paulo and Belo Horizonte (capital of Minas Gerais) where there
was an average 20 percent increase in births since July 1994. Hospital
São Luiz in São Paulo is spending $1.2 million on new facilities
to meet the demand. The signs are evident throughout the industry that
caters to babies. Earnings in the sector have increased a whopping 70 percent
in the last 2.5 years generating $1 billion per year. 

There is an explosion of shops selling to the newborn set. Opened in
São Paulo at the end of 1995, a 51-store mall specializing in products
for children, Kids — a $10-million investment — is already recording
$1 million a month in sales. Just one year ago, its creators were dreaming
of making $2.5 million a year. The Market Place, another shopping mall
with children in mind, has innovatively provided shopping carts for children
in the supermarket so the tots can do their own shopping. 

According to SBEP, a company that specializes in organizing fairs for
the baby industry, the number of shops selling baby stuff has skyrocketed
from 7,000 in mid 1994 to 20,000 today. The XI Expo Bebê e Gestante,
a fair with products for babies and pregnant women that took place last
October in São Paulo, featured more than 200 stands representing
companies from all over the world. 

Times are so promising that Yankee companies Gracco and Century , two
of the world’s biggest names in baby car seats and strollers, have already
made known their plans to invest in Brazil in 1997. They will be joining
multinationals such as Johnson & Johnson — which has announced $70
million in fresh investment to develop new children’s products — Kimberly
Clark/Kenko, and American Procter & Gamble, which is also committing
$70 million to produce more diapers. They are working under the assumption
— for lack of an official number — that the Real has generated eight
million children so far. 

In an interview with weekly magazine Isto É, Ruy Marco
Antônio, the director superintendent of Hospital e Maternidade São
Paulo, argued: “The middle class worries too much about consumption.
They always want to know how much they are going to spend to raise a child.
Inflation scared them. Now they can budget their expenses” 

Another service in high demand is in vitro fertilization. Do to its
high expense — typically from $3,000 to 7,000 — artificial insemination
is restricted to the upper middle class and wealthy. Celeste and Joshua,
the newborn twins of Assíria Seixas Lemos and Édson Arantes
do Nascimento (Pelé), are merely the most famous of a crop of babies
born through this method. Pelé, the legendary soccer player who
is now Brazil’s Sports Minister, opted for this method after a failed operation
to reverse a vasectomy 17 years ago. The clinics that specialize in this
kind of treatment have seen a measurable growth since the introduction
of Real. Close to 2,000 couples tried to artificially conceive a child
in Brazil in 1995. In São Paulo, for example, the Clínica
Roger Abdelmassih expects to end the year with 700 in vitro fertilization
trials up from 450 just two years ago. 

All of this happens in a country where the fecundity rate has been falling
consistently since 1960, when there was an average of 6.28 children for
every child-bearing-aged woman.. According to IBGE (Instituto Brasileiro
de Geografia e Estatística — Brazilian Institute for Geography
and Statistics), in 1970 this number had fallen to 5.76, in 1980 to 4.35,
and all the way to 2.8 in 1994, the last year for which the IBGE has data.
Due to this trend, population growth has fallen from a yearly average of
2.48 percent between 1971 and 1980 to 1.93 percent during the period of
1980 to 1991. 

The middle-class baby boom is also occurring against the backdrop of
a series of tragedies involving newborn babies in October and November.
In a 50-day span, at least 92 babies died in public maternity wards throughout
the country, all due to overcrowding and lack of proper care and hygiene
in the hospitals. Forty nine babies died at Maternidade Escola Assis Chateaubriand
in Fortaleza (state of Ceará) in the first two weeks of November.
There were 32 other cases in Boa Vista (capital of Roraima) and 11 in Niterói
(Rio de Janeiro). 

One third of the 150 million-strong Brazilian population is 14 years
old or younger. Some 15 million of these children belong to the middle
class. They represent a market of $50 billion or 10 percent of the Brazilian
GNP. And this is before any consideration of their leverage in buying almost
everything else in the house, including cars (minivans have been invading
the Brazilian market as in the US), computers (adults are generally too
dumb to know which machine to buy and 26 percent of all home computers
are bought due to the insistence of a child), and even houses. According
to industry sources, Brazilian children spend $1 billion a year on cookies
and $4.8 billion on soft drinks. 

“Everything a child wants, he gets,” said ad agency McCann
Erickson’s director Helena Quadrado in an interview with weekly newsmagazine
Veja. “No one refuses anything to their children.” In
a recent study, McCann Erickson found that 63 percent of São Paulo
city’s middle-class 13-years-old or younger have a TV set in their own
bedroom. The research has also revealed that allowances, as a fixed amount
of money given to the child every month, are on their way out (less than
half of the children receive them) while an open budget and more freedom
to spend the money have become the norm among these children. 

This new independent breed of children, who had to learn to fend for
themselves while both parents often had to work to make ends meet, doesn’t
seem particularly greedy or undisciplined. Books for children have both
mirrored this new reality and helped empower children to question authority,
doing away with the absolute power and infallibility of the adult. Among
the current book heroes there are Ruth Rocha’s Marcelo Marmelo, Martelo,
the saga of a little boy who has his own ideas and even decides to create
a new language, and Ziraldo’s O Menino Maluquinho, the crazy little
boy who used to get an F in behavior, but was very happy anyway. 

At the same time, a reevaluation of the role of parents and in particular
that of mothers, is occurring. As in the US, many Brazilian women who had
prosperous careers are redirecting their energies and often reassuming
their posts as homemakers, but no longer as the celebrated queens of the
household of past generations. The personal-success-at-any-cost attitude
has given way to a desire to achieve personal and affective realization.
And many women in their 30s are listening to their biological clocks ticking
and have decided that it’s the time to start or expand the family. 

While maternity leave in Brazil lasts four months, not the one month
or less that’s the norm in the US, many women think this is not enough
time to bond with their newborn. Some celebrities have adhered to the back-to-home
concept in recent months giving the idea their seal of approval. Among
them is actress Patrícia Travassos, 44, who has given up a successful
career on TV and the stage to dedicate herself to her home and her 7 year
old son Nicolau. 

While enjoying herself at her apartment in Ipanema, Rio de Janeiro,
she told Isto É about the different standards applied to
men and women: “If a man is late to work because he went to take his
son to the dentist, he is considered a good father. When this happens to
a woman, we are not considered good professionals because we are bringing
our domestic problems to work.” 

For some 9.6 million women who are single parents, the task of juggling
outside and home work can be formidable. According to IBGE, one in every
four families in Brazil are managed by a woman, often without any financial
or other help from the former husband. It’s estimated that by the year
2000, 40 percent of all jobs will be held by women in Brazil. This doesn’t
mean, however, that women will get new respectability in the work place.
Right now, the average salary for a woman is 24 percent lower than that
for a man. 


Growth Pains 

and Rewards


The same Real that has saved Brazilians from the mandibles of apparently
chronic inflation has also caused some conflicting feelings, ranging from
an initial shopping euphoria to a lingering despair for those who lost
their jobs after the government put on the brakes. In the first drive,
the taming of inflation made people feel very powerful and brought them
in droves to the stores in a festival of consumerism. Government intervened
through a double dose of high-interest rates and short period payments
for sales on credit. 

As a result of these measures, there was a retraction in the economy
and unemployment became rampant. Jobless figures reached a peak of 16.2
percent in the Greater São Paulo area in June and have been falling
since, but rate is still in double digits. An optimist by profession, Finance
Minister Pedro Malan declared recently: “No one can deny that the
country has become a better place. Economic stabilization is a marathon
with barriers. We have already passed several of them and certainly we
will have new one to overcome. But we have the lowest inflation since 1957
and perfectly sustainable growth rates.” 

Experts are predicting a 4 percent growth rate in the Gross Domestic
Product for 1996. There are fears that an expansion larger than this might
bring inflation back. The rate, however, seems good enough to keep the
economy humming along, with enough production and sales not to add to the
hordes of unemployed. Economists are just hopeful they will not have to
endure other crises such as the one that followed the Mexican debacle of
1995, when Brazil lost $10 billion from its reserves, money already recouped
by now. Another serious setback was caused by the insolvency of Econômico
and Nacional, both among the five largest Brazilian banks. A much-feared
chain reaction that would hit other financial institutions hasn’t materialized
and the economy seems to be recuperating fast from the shock. 

There are, however, some business practices that are causing the economic
policy makers to worry. One of them is the credit that supermarkets are
extending their clients for buying food staples. José Roberto Mendonça
de Barros, the Finance Ministry’s secretary of Economic Policy, has expressed
his discontent in face of the seemingly dangerous trend. “The length
of credit has increased too fast and these sales are not backed up by durable
goods,” says Mendonça de Barros. “We need to call these
folks for a little chat.” 

Last year in São Paulo, two million people were on the black
list of bad debtors, but this number has since been cut in half. The economy
is growing again, and while some sectors continue to hurt, other industries,
including those that manufacture electronics and home appliances are booming.
From January to September, Brazilians bought 6.4 million TV sets, 4 million
irons, 2.8 million refrigerators and 2 million video players. While 76
percent of the houses had a TV set in 1993 this number had increased to
81 percent by the end of 1995. The number of households with refrigerators
grew from 72 percent to 75 percent, while 27 percent of Brazilians now
have a washing machine (compared to 24 percent two years ago) and 15 percent
have a freezer (compared to 12 percent before the Real). 

Since the introduction of the Real, income has increased an average
of 30 percent. The poor got the bigger benefits. Those workers who were
making around $60 had their income doubled. Capital goods and auto parts
— national manufacturers are feeling the squeeze from foreign companies
— are two of the sectors that are still limping. Despite generalized complaints
from the auto industry, that sector increased its production by 10 percent
in 1996 when compared to 1995 and automakers are committed to investing
$9 billion in three years to expand their factories. 

Brazilians are also eating better since the advent of the Real. Consumption
of products like beef, chicken and canned food has increased almost 5 percent
in comparison to 1995. Thanks to the new currency, 11 million people were
upgraded from poor to lower middle class, producing an increase in sales
of non-essential products such as soft drinks, linens, and beach paraphernalia.
A study from IPEA (Instituto de Pesquisa Econômica Aplicada — Institute
for Applied Economic Research) has shown that since the end of 1994, the
number of people under of the poverty line fell from 16 million to 11 million. 

As for inflation the reality has been rosier than the predictions. For
1997, it’s expected that inflation will not surpass 8 percent for the year.
In response to the market, the federal government is again and very cautiously
relaxing credit through the lowering of interest rates and the lengthening
of time for financing. A car, for example, can be bought over 48 months,
much more feasible than the less than one year plans of the recent past.
As extra protection, Brazil has $58.7 billion in reserve for eventual foreign
debts. Only Japan, Germany and the US have bigger reserves. 

Different from the IBGE, which uses the salaries of all the family members
to rank the prosperity of the people, , the research company Marplan groups
Brazilians into five different categories (A to E), according to a basket
of services and goods that people receive. The classification, widely used
for marketeers, shows that Brazilians from the lowest classes (D and E)
measured only 33 percent in 1995. A similar study in 1986 showed that 42
percent of the population belonged to those classes. Ten years ago the
C group was 32 percent and it has increased to 38 percent. The most privileged,
the A and B layers have also grown from 25 percent to 29 percent during
the same period. 

Changes in consumer habits have forced DIEESE (Departamento Intersindical
de Estatística e Estudos Sociais – Inter-Union Department of Statistics
and Socio-Economic Studies), a research institute maintained by workers’
unions, to eliminate some items and include others on the list it uses
to compute the cost of living index. Products like vinyl records and black
and white TV sets have disappeared from their inquiries while new products
like disposable diapers and yogurt have been added or were given more weight. 

Despite all the improvements and better distribution of wealth, Brazil
continues to be a land of huge contrasts between the extremes of poverty
and wealth. While the poorest 70 percent take 26 percent of the country’s
income the richest 10 percent take 47 percent of all the wealth. Services
continue to be a problem, too. Forty percent of the houses are not served
by public sewers, 24 percent have no tap water, 28 percent don’t get their
trash picked up and 8 percent still don’t have electricity at home. All
this without even mentioning telephones. Before the Real, only 19 percent
of residences had a phone. Today a mere 22 percent have one. 


Underground Market 


Unemployment figures have been scary. According to DIEESE (Departamento
Intersindical de Estatística e Estudos Sociais — Inter-Union Department
of Statistics and Socio-Economic Studies) there were 1.32 million unemployed
in São Paulo in August. That’s 15 percent of that city’s workforce.
Such dire numbers are the worse in memory except for August 1992, when
the recession provoked by the Plano Collor (the economic plan named for
impeached President Fernando Collor de Mello) was at its peak. 

Even though this perception of the worst of times might also be due
do the fact that measurement is a little more precise nowadays, the situation
would be much worse if Brazilians weren’t so malleable and inventive. They
have been doing all kinds of jobs and tricks to survive. A large contingent
of them has entered the so-called informal market. From the 70-million
strong Brazilian work force at least 35 million get their main source of
income or part of it through work on the side. 

Such a huge informal economy can only be matched by countries of the
so-called Fifth World, like Somalia and Bangladesh. These clandestine business
people, who have no health insurance and end up using the overcrowded public
health system, are responsible for a $220 billion economy, or close to
35 percent of Brazil’s official GDP (Gross Domestic Product). 

In the first official effort ever to find out how widespread the under-the-table
economy is, IBGE studied it in Rio de Janeiro and found that there are
444,420 informal outfits functioning without permits in that city. Guaranteeing
work for 560,000 people, these outlaw activities generate $6 billion a
year, an amount that not even Shell of Brazil can match. This amount represents
18 percent of Rio’s GDP. Surprisingly the average monthly income of an
informal business is $1,100, 11 times the minimum wage. That means that
a street peddler in Rio brings home five times more money than a teacher
from a public school, and four times more than a bank cashier. 

Quite curiously, such informality in some cases has been a blessing
in disguise. Many people who go underground after they are fired find out
that they wouldn’t take their old job back if it was offered to them. There
are stories of people graduated from college who are doing much better
selling in the streets without a permit than they were before in their
underpaid white-collar jobs. 

Isto É recently told the story of Frederico Ladeira, 36,
a high-school teacher who instead of taking home a $400 monthly salary,
is now making 2,000 selling chocolate candy that he manufactures at home
and sells without any permit or receipts. All under the table. “Professional
fulfillment doesn’t fill the stomach,” he told the magazine. “I
wanted to do something to make money.” 

For 22 years now, the number of jobs in Brazil has been shrinking —
as in the rest of the industrialized world for that matter. While the population
was increasing at a rate of around 2 percent a year and the industry grew
2.9 percent between 1974 and 1983, the number of jobs expanded a miserly
0.15 percent. Since 1983, industry growth fell to 1.9 percent and the job
market started showing a negative result: an average of minus 1.35 percent
a year. 

The Brazilian bureaucracy is in part responsible for the size of the
informal economy, which consists not only of street vendors and people
hawking their goods at stop lights. Many people work for companies that
never register them, avoiding the costs of official hiring, which would
more than double the cost of an employee. There are close to 20 fees that
have to be paid by the employer, including fees for social security, unemployment
fund, and education-salary. 

The outlaw workers are starting to organize themselves. Throughout the
country there are already 11 unions for workers in the informal market.
“We are paying close attention to the situation,” says Vicente
Paulo da Silva, Vicentinho, the president of CUT (Central Única
dos Trabalhadores — Workers’ United Central). “We recommend that
those people who are in the informality organize themselves.” CUT
is planning a national conference for the first semester of 1997 to deal
exclusively with the theme. São Paulo’s Informal Economy Workers’
Union has close to 3,000 members. At least 50 people everyday come to their
office to inquire about starting their own business while ditching all
the government bureaucracy and fees. 

Baby Blues 


Brazilians not only make less than their neighbors to the north, they
have to pay much more for a similar baby product. The discrepancy occurs
in almost every other sector of the economy. 


Price in US$


Brazil …..US 

Baby bathtub ………..173 ……60
Stroller …………………256 ….100
Car seat ……………….191…… 80
High chair ……………..100 …..30
Rocking chair …………180 …..80 

Play pen ………………..280….. 80
Feeding bottle ……………6 …….6

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