Inequality is rising in Brazil, to a level not seen since the military dictatorship

The elites more and more wealth is concentrated in Brazil and at a rate three times higher than that of the general population, a jump not seen since the military dictatorship (1964-1985) and which calls into question President Luiz Inácio Lula da Silva’s goal of addressing inequality.

Brazil is one of the countries with the greatest inequality in the world, where luxury apartments are located a few meters from the favelas controlled by drug trafficking.

This is what happens in Paraisópolis, the second largest favela in São Paulo. On one side, a hive of exposed brick houses; on the other, imposing residential buildings with tennis courts and swimming pools on each terrace. Both realities are separated by an avenue.

Inequality is a chronic problem that stabilized in the first decades of the century with an improvement in the living conditions of the poorest, but this trend exploded between 2017 and 2022.

This is the conclusion of a study published this week by the Getúlio Vargas Foundation’s Fiscal Policy Observatory.

The findings are based on preliminary analysis of tax return data and paint a discouraging picture: the level of concentration of wealth at the top of the social pyramid reached a record between 2017 and 2022, a period in which conservative Michel Temer and the far-right Jair Bolsonaro.

The inequality gap in numbers

According to the report, the richest 0.1% are made up of 153,666 Brazilians and their income has almost doubled in that period to reach an average monthly salary of 440,000 reais (about $90,000).

Meanwhile, 95% of the population, or 147 million people, have reached2,300 reais ($465) per monthwith growth of 33%, slightly higher than inflation for the period, which stood at around 30%.

“There was a very strong increase in the concentration of wealth. Perhaps it was the first major episode of increase in inequality since the times of the dictatorship”, he explained to Sérgio Gobetti, author of the study and economist at the Institute of Applied Economic Studies (IPEA ). EFE.

This phenomenon has been reflected in the Brazilian luxury products market.whose sales have skyrocketed in recent years.

Nearly 75 billion reais (15 billion dollars at today’s exchange rate) will move in 2022, according to a report by the consultancy firm Bain & Company published by the newspaper. Economic value.

«And projections say that in 2023 sales will increase by 30%, specializing in the luxury market. Brazil today competes with Mexico to be the Latin American country with the greatest movement in this exclusive segment.

“In ten years in Brazil the number of thousand millionaires has doubled”specifies the specialist, underlining the enormous growth of the agricultural sector, which has caused a ‘boom’ of ostentation in states such as Goiás (centre), where there are houses valued at 10 million dollars.

What factors are behind it?

Behind the increase in inequality in this country of over 200 million inhabitants There are structural and circumstantial factors, according to Gobetti.

Among these, he cites the reaction of companies when they saw that Congress was advancing a project to tax profits and dividends distributed by companies, which are currently exempt from tax returns.

That proposal is stuck in Parliament, but the companies, fearing that it would go ahead, As of 2021 they have distributed the maximum possible dividends among their partnersincreasing their wealth.

All this in the midst of the Covid pandemic, which has hit an economy with 40% of workers in the informal sector and a skyrocketing homeless population. In 2022, there were 281,472 homeless people, according to official data.

Likewise, there is another set of tax benefits included in Brazilian legislation that favor certain sectors, such as agriculture.

The Lula government is trying to eliminate these privileges, even if it encounters resistance in a Congress with a liberal and conservative majority.

In 2023 he managed to approve a reform to simplify taxes and tax sports betting and the funds of the ‘super-rich’. This year it is proposed to change the income tax so that “those who earn more, pay more”. EFE