Volume 43, Number 171,
October-December 2012
Structural Limits on Economic Development:
Brazil (1950-2005)
Bibiana Medialdea
The Inflexibility and Segmentation of the Demand for Consumption

The inflexibility of the internal market for investment is reinforced by private consumption. Between 1950 and 1980, consumption in Brazilian families rose at an average annual rate of 7%20, becoming, together with investment and consumption from the State, one of the most potent motors for growth. On the contrary, since then, private consumption has evolved slowly, so that between 1981 and 2005, average growth has been low, at 1.4% annually. As a result, considering that initial levels of consumption are negligible and their growth rate is suddenly interrupted at the beginning of the 1980s, it is fitting to say that the first sign that makes clear the demand for consumer goods and services is the reduced magnitude of the internal market.

Additionally, as a second sign, if final consumption evolved more dynamically, it is because consumption from the State grew at an important and sustained rate. Public consumption not only increased at a rate close to the gdp during the decades of greatest dynamism (6.6%), but it also saw important growth (5.3% annually) between 1981 and 2005. It is in this way that State consumption grew at a rate higher than 6% annually throughout the fifty-five years taken into account. In other words, it grew significantly more than private consumption.

The other important sign that reveals behavior of private consumption is that it is characterized by a high level of segmentation. The composition of family consumption reveals a very polarized structure, which corresponds to two opposing patterns of consumption: one based almost exclusively on subsistence goods and the other with very high income-elasticity.

A symptom of this is that a significant part of private consumption is made up of durable goods, and another significant part consists of goods and services that can only be acquired with medium-high and high income levels. The fact that the automobile and household appliance markets are the most dynamic confirms this. In reality, the growth of these markets explains the expansion of private consumption during the decades of industrialization, and although it decelerates starting in the 1980s, these markets still stand out later on. During the 1970s, sales of automobiles essentially shot up, increasing at an annual rate of 13.1%, so that by the end of the decade, approximately 800,000 cars were sold in Brazil every year (Anfavea, footnote 13). In these years, consumption of household appliances also grew spectacularly: the number of ventilators sold was at 15.1% annually. Other rates were 14.2% for radios and 14% for air-conditioning equipment. The number of televisions sold rose to 13.6% every year and refrigerators rose to 12%. Let us consider that in the last years of the 1970s, Brazilians were buying around 2.8 million television sets, 5 million radios and 2 million refrigerators a year.21 Consumption of this type of goods fell considerably in the 1980s, but stayed at a growth rate well above that of total private consumption.

At the same time, certain luxury goods also came to occupy a relevant place in the consumer market. We refer to jewelry, high fashion, automobiles and high-level electronic equipment, yachts and helicopters for personal use, etc. To give an example, it is useful to point out that Brazil is the second highest country in the world for sales of Montblanc pens and the ninth in sales of Ferrari brand cars (Cauduro, 2004: 18). The French company Louis Vuitton, which specializes in high fashion and luxury accessories, has a store in São Paulo, which is fifth in the world by volume of sales ( MCF Consultoria & Conhecimento and Gfk Indicator, 2009). Even though the demand for this type of goods is sustained, as we will analyze in the following section, for social groups that represent a very small proportion of the population, the dimension of the country means that the luxury market acquires a very important size, which currently is calculated at $5 billion dollars annually. There is a reason that Brazil accounts for 70% of luxury consumption in Latin America, and is situated second place in the world ranking of growth potential of luxury markets (Íbidem ).22

The inflexibility and the segmentation of private consumption are also definitely related with productive specialization that opts for the branches of consumer goods within the industrial structure, and whose fundamental pillar is the production of durable consumer goods.

20 Remember that the growth rates for the components of aggregate demand — private and public consumption, in this section — were calculated based on series from ibge (Sistema de Contas Nacionais ), available at: http://seriesestatisticas.ibge.gov.br/lista_ tema.aspx?op=0&no=12 and the ipea portal (http://www.ipeadata.gov.br).

21 Data is from Abinee (Brazilian Association of the Electrical and Electronics Industry), but can more easily be found at the ipea portal (http://www.ipeadata.gov.br/).

22 The analysis performed by an executive from Bang & Olufsen , a company that manufactures high-level audio and video equipment, is illustrative. Even though they calculate that the Brazilian population that uses their products is less than 1% of the total, this potential market is roughly equivalent to half of Denmark, which is the company’s country of origin. They conclude, “Brazil is a country so big it is almost impossible not to earn money” ( Veja magazine, July 24, 2002, p. 28).

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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