The New Middle Class

In his new book, Lulismo. De la era de los movimientos sociales al ascenso de la nueva clase media brasileña [Lulismo: From the Era of Social Movements to the Rise of the New Brazilian Middle Class], sociologist Rudá Ricci organizes his analysis around socioeconomic changes. He maintains that the many social movements born in the eighties — the unions, the Landless Movement (Sem Terra), the PT, the Christian base communities — ran out of steam when they became institutionalized. “The street, the main stage for the new social movements of the eighties, was traded for conferences and meetings in government offices.”

During Lula’s presidency, the middle class, or, according to the way salaries are measured, the “C class,” made up of families earning between three and ten minimum wages, went from 37 to 50% of the population. There are now 91 million Brazilians who can buy plasma TVs, airplane tickets, cars and many other goods, including their own homes. “Lula speaks for this new middle class, these millions of Brazilians who break with their family histories of exclusion from mass consumption,” Ricci explains.

He goes even farther: “Lulismo operates on the basis of the integration –under the tutelage of the State- of urban and rural poor into middle-class consumer markets. Historically, these sectors have descended from the poor and marginalized, which makes for a family tree of resentment, cynicism and distrust towards politics and current public institutions.”

Lulismo began to take shape during the 2005 mensalao crisis caused by the discovery of the massive buy-off of representatives by the PT party. This led to the firing or resignation of many of Lula’s allies. The political crisis explains how lulismo was forged in adversity and “followed a clear option for the construction of consensus between the country’s traditional political powers,” says Ricci.

But the new middle class that is living the poor Brazilian’s dream of social ascent is quite different from other places, for example, the Rio de la Plata. It’s strongly linked to community and religious ideas, it has grown across religious faiths and is more comfortable in an intimate culture that focuses on the family, to the point that it appears to behave according to a “pattern of social participation that has little interest in achieving comprehensive, universal rights.”

Ricci concludes that it is made up of people “who do not spend time reading and are absolutely pragmatic.” This feature–a hard, inexorable pragmatism–would seem to explain loyalty to Lula and rejection of social actions, since the latter imply uncertain certain costly results in family and personal terms.

Petrobrás: The Crown Jewel

Brazil is now a world power. The recent increase in Petrobrás’ capital makes it the world’s second-largest oil company and fourth-largest company based on market value, and it is just one example of the country’s global projection. The oil company gained 120 billion reales (about 70 billion dollars), surpassing Nipon Telegraph and Telephone (NTT), which made 36 billion in 1987, and the Agricultural Bank of Chine, which took in 22 billion dollars in what had up to then been the largest capitalization of the year.[2]

The operation’s success was solidified by the emission of 2,402,611,655 ordinary shares and 1,867,808,535 preferential shares purchased by investment funds, the Brazilian state and more than 400,000 investors. In order to access 5 billion barrels on an offshore platform, Petrobrás had to sell the equivalent of 43 billion dollars in stock to the State. Thanks to this transaction, the State’s participation in the business jumped from 40 to almost 50%.[3]

Additionally, around 20 billion dollars in stock were bought by foreigners. The massive influx of dollars led to a revaluation of the real. Some pension funds controlled by unions, like the Bank of Brazil’s Previ and the Petrobrás workers’ Petros, control four percent of stock.

With these new funds, Petrobrás is putting its ambitious investment plan into action, overcoming a debt that had risen to 34 per cent of its liquid assets. It plans to invest 224 billion dollars, or an estimated 12 per cent of Brazil’s gross domestic product, until 2014 to double oil extraction. Right now, Petrobrás has the capacity to produce 2 million barrels a day, but intends to extract another 2 million per day in the years to come. This requires building 14 offshore platforms connected to 184 wells–an investment of 18.5 billion dollars.[4]

The “largest capitalization in the history of capitalism,” as explained by Guido Mantega, the minister of the Treasury Department, raised the value of Petrobrás to $220 billion, exceeded only by Exxon, valued at 290 billion, and ahead of Microsoft and Wal Mart.[5] Nevertheless, according to some calculations, the Brazilian company will need another $90 billion to carry out its ambitious plan, which consists in exploiting oil from below the salt crust, which means drilling through a layer of salt up to two kilometers thick on the ocean floor, some 300 kilometers from the coast.

In November of 2007, an oil reserve with 5 to 8 billion barrels of oil was discovered in Tupi, in the Santos basin. This is one of the biggest discoveries in the world since 2000. In April of 2008, Petrobrás announced the discovery of the Carioca megafield, with reserves numbering close to 33 billion barrels. However, experts believe that the total reserves could be anywhere between 50 and 100 billion barrels, which would make Brazil one of the world’s biggest oil producers.

According to the economics publication Exame, the Sao Paulo mercantile exchange (Bovespa) became the second biggest in the world in market value after the September 23 session, only surpassed by the Chicago mercantile exchange. According to Emir Pinto, Bovespa president, only the Hong Kong mercantile exchange is worth more than Brazil’s, which exceeds the value of the New York and London exchanges by 25 per cent.

Bovespa went from 200 billion dollars in annual transactions to two trillion dollars, and authorities consider that it has a large margin for growth: up until 2014, the number of people able to invest can go from 600,000 to 5 million. A euphoric Lula spoke about Petrobrás’ success: “I spent my whole life saying I was a socialist, and now I’ve made the largest capitalization the capitalist world has ever known.”[6]