Flavia Fernandes attends university in Rio. She is the first person in her family to go to college, but as Brazil’s economy ruptures, Ms. Fernandes and her family now struggle to pay basic bills.Daniel Ramalho/The Globe and Mail
In 2009, Flavia Fernandes and her family moved from a rented apartment in a poor and violent neighbourhood in Rio de Janeiro to a small house they bought in a coastal suburb. It was a physical move, and much more than that: Furnishing a home of their own, something that once seemed unimaginable to her working-poor parents, they were part of a huge change in Brazil.
In the course of a decade-long economic boom, more than 30 million Brazilians moved out of poverty, and it was families such as Ms. Fernandes's who saw the biggest shift in their lives.
They benefited from the rise in wages (the minimum wage, which her parents earned as a domestic worker and a bus ticket taker, rose 77 per cent in real terms over the past 13 years) under the left-wing Workers' Party government. There was new access to credit, such as the government-backed mortgage that allowed them to buy their house with no down payment.
Ms. Fernandes, now 29, won entrance to a prestigious state university, which charges no tuition, to study biology and education – the first person in her family to pursue higher education, confident that she could delay working because of the opportunities that awaited her.
But the Brazilian boom sputtered to a rude halt midway through 2014: Brazil's gross domestic product contracted by 3.8 per cent last year and is expected to finish this year with a decline of an additional 3.2 per cent.
Nearly 12 per cent of the work force is unemployed, and there is pervasive unease and uncertainty about the future, which was little relieved by the impeachment of the president earlier this month.
The crisis, as it is simply called here, has had an impact across all of Brazil, but it is felt most keenly in Class C, as families such as the Fernandeses are known here (monthly household income of $425 to $1,400).
Brazil's wealthy elite had assets to shield them when the recession hit, says Renato Meireilles, founder of a demographic research firm focused on Class C called Instituto Locomotiva.
That's why upscale restaurants still have lineups on week nights and flights to Miami on the "Disney Shuttle" are still full. In fact, the highest-paid group saw their income rise 2.4 per cent this past June, compared to 2015.
The poorest, predictably, have been hit hard: Those who earn less than the monthly minimum wage of about $270 (informal workers, such as street sellers) saw a 9-per-cent decline in their income on average in June compared to the same month last year, according to the latest data from the Institute for Applied Economic Research. They struggle to continue to pay for basic necessities.
But it is Class C families who saw the most dramatic change in their standard of living since the good years: They have no asset cushion, and were most likely to work in the manufacturing, construction, retail and service sectors, where the bulk of jobs have been lost.
Many are reeling both under the struggle of day-to-day survival and the emotional impact of watching the startlingly fast erosion of the gains they made.
More than 50 per cent have taken on a second source of income, either a formal job, when they can be found, or informal work, such as selling snacks or occasional driving for Uber.
Twelve per cent of families with children in private school shifted them to the lower-quality public system this year; Amabile Pacios, director of the National Federation of Private Schools, says virtually all of those are Class C families who had put their children into lower-end private schools, "something that was a dream and a first priority for all the people in this group when they had more income."
The same shift is happening in health care: In the year from March, 2015, 1.3 million Brazilians cancelled their private health insurance, according to the National Health Insurance Agency, and turned to using the under-resourced public system, either because they lost their coverage when they lost their jobs or because they can no longer afford payments for a private plan.
Caixa Econômica, the main lender to Class C, says the number of foreclosures by the bank nearly doubled from 2013 to 2015.
Cristiane Curcio, who heads the National Association of Borrowers, which provides legal assistance to people who are facing foreclosure, said the great majority of those affected are first-time owners such as the Fernandes family.
The association gets the most calls from the industrial heartland of Sao Paulo, where factory towns are now "frozen," she said, and from Rio de Janeiro state, where the impact of more than 170,000 layoffs by the state energy company Petrobras has been devastating.
Renan Ataíde Mariano, 28, is fighting to stop the imminent bank auction of the home he bought in Valentim Gentil, a small town in Sao Paulo state.
Mr. Mariano is a heavy-machinery mechanic whose work has dried up in the past two years. He and his wife, a cleaner, bought the house in 2012, when both were earning steady salaries; this year, they fell six months behind on their payments, but they cannot persuade Caixa to renegotiate, and commercial loans are exorbitant.
If the bank were willing to cut their $200-per-month payments in half, they could probably manage, he said.
Across the country, people are drastically reducing their spending, said Renato da Fonseca, director of research for the National Confederation of Industry, which regularly surveys Brazilians on their spending. They have cut back on the quantity and quality of food they buy; turned to public transportation; and cut down or eliminated travel, entertainment, dining out and clothing purchases in an effort to make mortgage payments, serve debts they ran up in the good years and pay the bills.
Ms. Fernandes's mother came out of retirement and went to work in a daycare centre. The family stopped eating meat regularly. She can't remember the last time she bought new clothes; when her phone broke, she didn't replace it.
They have appealed to their lender in the hope of relief on the house payments. She lost the paid internships she had. Her degree is dragging on because the professors and staff, who aren't getting paid by the broke state government, keep going on strike for months at a time.
"I'm qualifying as a teacher in a state that can't hire teachers. … I could work in the environmental sector, except that in this economic situation, these are the first programs to be cut," she said. "The future is so uncertain. … Everything hurts, in this crisis – it's hard on the mental health of everyone at home. Because everything in our life has changed now."
Mr. Meirelles, the Class C researcher, said this group feels the crisis most acutely because of the newness of what they are losing. While this isn't, statistically, the worst economic crisis Brazil has ever faced, almost everyone in this demographic says it is when surveyed, because in previous periods of steep recession, they weren't consumers and they didn't feel the change, he said.
There is a vicious-cycle aspect to the curtailing of consumer spending. In the good years, Ms. Fernandes's family bought furniture, a big TV, computers, a fridge. That kind of hunger, for white goods in particular, played a huge role in Brazil's boom.
Consumers contributed an estimated 50 per cent of the GDP growth during the decade to 2015. But today, consumer confidence is barely half of what it was five years ago; no one is buying.
"There's a new aspect to this crisis, which is that people have had access to credit and now they have debt: In the past, you had a crisis, you had income but you didn't have a lot of debt – because of inflation you bought everything with a lump sum," said Mr. da Fonseca from the industry association.
"The recovery of growth in Brazil is going to take much more time because consumption is not going to come back as fast as it did before, because families are more indebted."
All of this puts additional onus on the government's recovery plan: President Michel Temer, who took over after Dilma Rousseff was impeached, ending four successive Workers' Party governments, has pledged a stringent fiscal adjustment designed to boost investment.
He has pledged to cut spending (the majority of which is fixed by law on health, education and pensions) and reform labour laws and social security, particularly Brazil's generous pension plans.
That's an additional source of stress for everyone newly struggling in Class C. Ms. Fernandes's father fears that his pension will be reduced. He is disabled, and relies on a range of medications that the family now receives free through a federal government program. She fears that may be cut too. "And then we will left choosing between eating and taking care of health."
Renan Barreto, 26, lost his job at a Rio IT company in March, when the firm saw its clients evaporate. He, too, was the first in his family to get a college education; he was able to attend thanks to a student loan program that funded his whole degree. (Mr. Temer suspended this program in one of his first acts as President).
Now, however, Mr. Barreto has loan payments, as well as all the other expenses of life; his family recently signed up for a food basket of basic necessities for people in need. He spends his days applying for any job he sees advertised.
"It's like two lives: the one I had at the beginning of the year and the one I have now. Everything is just flipped upside down."
With a report from Elisângela Mendonça