Brazil's downturn

A few years ago, Priscila finally got a roof over her head. Literally. With her husband, the 26-year-old mother of three managed to pay for the installation of a concrete slab over their house located in one of Rio's hundreds of shantytowns. "It's not raining inside anymore," she says, while holding two-month old Bhayan.

When Priscila and her family moved in, some nine years ago, they slept on the floor. Nowadays, what used to be four walls covered with canvas has become a two-bedroom house with a tiny kitchen and a living room where Priscila's husband Romulo receives his fellow evangelists for prayer three times a week.

For Brazilians like Priscila, who have lived most of their life on the edge of the poverty line, the last 12 years have felt like a breath of fresh air in their daily struggle to make ends meet. The economic growth, coupled with redistribution policies, helped lift millions of Brazilians out of poverty. During that time, the unemployment rate fell from just over 12 percent to less than 5 percent. Minimum wage almost tripled, from $77 (68 euros) to $220 a month.

Good times, bad times

Those families that previously had barely enough money to put food on the table and pay the bills, could now afford a little more. Priscila's family paid in installments to buy furniture, appliances, a laptop computer, two TV sets, and a DVD player. Their aspirations seemed closer than ever before.

"It was getting better, but now it looks like the good times are gone," says Priscila.

Everything was going well until Priscila lost her job two years ago, and then Romulo. Both of them worked as bus cashiers until the company they worked for decided to abolish their function. Romulo got a new job as a janitor at a scientific lab not too far from home. Still, it was a big drop in income. Between Romulo's salary, government benefits and the occasional appliance repair that Romulo works on, they earn less than $500 a month.

These hardships have arrived at a moment when Brazil's economy is struggling. A cocktail of bad news has hit the country since last year's World Cup party ended with a humiliating defeat. Unemployment is on the rise, the economy is slowing down, and, along with corruption, inflation has become a trending topic among Brazilians.

"Diapers have become so expensive that it looks like a luxury item," complains Priscila. The $65 monthly allowance that she receives from the government for her three children doesn't even cover the cost of baby Bhayan's diapers. "I'm staying at home with my baby for now, but I'm anxious to get a new job to help my husband pay the bills," says Priscila.

Feeling the pinch

The pinch from rising prices seems to hurt more at the bottom of the socio-economic ladder. "It directly undermines lower-income people's capacity to consume by stealing a part of their revenue from them," says Getulio Vargas Foundation economist, Mauro Rochlin. "Now that inflation stands at around 8 percent, people with less money have to spend a greater proportion of their revenue to compensate for the rising prices," he says.

According to Renato Meirelles, president of the market research company Data Popular, "for lower-income people, crisis is not the exception, it's the rule." His research institute specializes in that population segment and Meirelles believes that Brazilians with lower revenues are highly resilient to economic crises. "They have grown up learning how to get the most out of their money. They may, for example, share an Internet connection with their neighbors, buy in bulk with relatives to get lower prices or get a second job to earn extra money," he says.

Meirelles also draws an interesting picture of the mentality behind that resilience. "Even if they're very pessimistic concerning the country's economy, they are optimistic when it comes to their personal life. Simply because in their mind, the economy depends on political decisions, whereas their well-being only depends on their efforts," says Meirelles.

Slippery slope

Still, the economic slope looks slippery enough to make Priscila and Romulo take heart-breaking decisions. Last year, they switched their two daughters to a cheaper school. It was the only way for them to keep their finances afloat.

According to Fluminense Federal University sociologist Jessé Souza, "there's a good chance that there's going to be some setbacks" for low-income families. But he adds, "I think it's unlikely that they will go back to square one, because over the last 12 years those Brazilians have gone through a learning process that cannot be reversed."

Priscila is confident that her family is going to find the appropriate resources to cope with the current situation. However, some of her wishes may have to wait. "We imagined ourselves finishing building our house and maybe buying a car someday," she says, "but it seems like we might have to forget about that for now."