Brazil Report: A Bold Player Blooms

Feb 01, 2012

Cover art by Sebastião Rodrigues. Courtesy of the artist.
If I were to suggest a title for your report," says Antônio Britto, "it would be, 'Trying to Fly'." Britto, a former state governor and federal minister, and currently executive president of Interfarma, the association representing research-based pharma companies in Brazil, reflects a more optimistic view than in 2007. The last time Focus Reports visited the country, executives were rife with the old saw, "Brazil is the country of the future—and will always be." Now, however, they speak in different terms. Brazil was the last country to enter the financial crisis, and the first to exit. As the host of both the 2014 World Cup and the XXXII Olympiad in 2016, and as a country cleaning out corruption from its highest offices, it is emerging from a decade which saw 40 million of its 200 million inhabitants joining the middle class, and creating a new block of "pharmerging" consumers.

This bulging middle class, known as "Class C" in Brazil, has been the main driver in Brazil's retail pharmaceutical market, more than doubling to U$26 billion and surpassing countries like the UK and Canada to achieve a top 10 global ranking, projected to reach top 5 by 2015. Indeed, this demographic shift is the result of faster growth and progressive social policies under eight years of a populist Lula government, resulting in record high average wages ($R1,629, approx. U$931 per month) and record low unemployment (6.4%), and less income inequality, with a declining Gini coefficient, the international measure of wealth distribution, from the help of programs like the Bolsa Família, a conditional transfer payment scheme.

Alexandre Padilha, minister of health
Growth has pushed inflation, which is sitting at 6.3%, at the upper range of the Central Bank's 2.5% to 6.5% target, even with the dampening effects of a real which has hit recent highs of 1.58 reais to the dollar. Approaching record levels since the currency first floated in 1999, the real was dubbed by Goldman Sachs as the world's most overvalued in 2009, and it has since appreciated by nearly 10% against the U.S. dollar. All this despite macroeconomic controls by the federal government—without which it's estimated the real would be worth 20% more—outlined by none other than Lula's successor, Dilma Rousseff, who recently reiterated her commitment against speculators in a Financial Times op-ed piece entitled, "Brazil will fight back against the currency manipulators."

This staunch commitment to national development, and positive macroeconomic indices, have created a perfect storm for rising standards of living, inclusive of expenditures on health. Nilton Paletta, country manager and VP, Latin America for IMS Health, explains the shift. "The one major factor influencing country growth and pharma growth alike is the change in social class distribution. Based on the increased stability of the economic situation, including employment and GDP growth, we have seen Social Class D to move to C, and C to B." In 2010, Class C exceeded 100 million, with Brazil's biggest class comprising over half its population. "This helps increase access and impacts the market's growth, because these people have more income, and if officially employed also benefit from private health insurance, which both contribute to better access to medicines and doctors," Paletta says.