SAO PAULO (Reuters) - The streets of Jardim São Luis, a poor and violent neighborhood near the edge of São Paulo, have not been this quiet in years. And that is exactly why Valeria Rocha is so worried.
Arms folded, she scans the racks of baby clothes in her small store before flicking a glance towards the empty sidewalk.
“Just a year ago this area used to be packed with shoppers but nowadays it’s all empty, my store included,” she said.
After a decade of economic growth and welfare policies that lifted more than 30 million Brazilians out of poverty, Jardim São Luis and other tough neighborhoods across Brazil had high hopes for the future.
But a faltering economy and mounting frustration over poor public services are dimming the outlook for Brazil’s “new middle class.”
As that happens, leftist President Dilma Rousseff is watching a once-loyal base - and her chances of re-election next month - slip away. Her main rival, environmentalist Marina Silva, has surged in the polls and is favored to win a likely second-round runoff against Rousseff.
Last month, 13 of 14 people interviewed in Jardim São Luis said they were sure they would not vote for Rousseff, but could not point to a clear alternative. Just a week later, after the first televised debate between the candidates, 8 of 10 people interviewed said they had already decided to vote for Silva or would strongly consider it. The other two were still unsure.
Silva, who grew up poor on a rubber plantation, has emerged as the anti-establishment candidate in this campaign. Within three weeks of entering the race late following the death of her party’s original candidate, she is in striking distance of becoming the first Afro-Brazilian woman to lead Brazil.
“Marina is humble, like us,” said 60 year-old fruit vendor Ana Luiza de Souza in Jardim São Luis. “Dilma did what she could, now it’s time for something new.”
Brazil’s emerging middle class is a defining legacy of Luiz Inacio Lula da Silva’s 2003-2010 presidency, a period of rapid economic growth that slashed poverty rates and fueled a massive surge in consumer spending.
It is the lowest-earning yet most populous segment of Brazil’s broadly-defined middle class, which ranges from the very comfortable to those who in developed countries would be described as the working poor.
Defined as those with a monthly household income of three to five minimum wages - about $960 to $1,600 - it includes millions who are hovering just above the poverty line but whose spending habits have been transformed.
About 108 million people, or nearly 54 percent of the population, are in the increasingly influential demographic, a key target group in the tight presidential race.
Many live in neighborhoods like Jardim São Luis. Here, higher wages and newfound access to credit during last decade’s economic boom opened the door to once-unattainable goods and services.
In time, new cars trundled up the neighborhood’s hilly side streets, where bare brick houses were remodeled and filled with new furniture and televisions. For the first time, many residents bought smartphones and brand-name clothes.
By the time 2010’s presidential election came around, economic growth was running at 7.5 percent, the future looked promising, and most of the neighborhood voted for Rousseff, largely because she was Lula’s hand-picked successor.
But four years later, the economy is stagnant, inflation is stubbornly high at 6.5 percent and much of the middle class is fuming. That anger boiled over in June of last year, when more than a million Brazilians took to the streets in anti-government protests.
“Lula changed Brazil a hell of a lot and everyone thought things would follow on the same path with Dilma. They didn‘t. This year not many people around here are going to give her another chance,” said Ricardo Matavelli, a furniture assembler in Jardim São Luis.
Even Lula now faces criticism from some voters who fear the economic improvements of the last decade could simply disappear.
“I trusted Lula and Dilma when they said things would keep getting better. Not anymore. Everything is just getting worse,” said Rocha, who as a child rarely saw her mother because she had to work long hours to support the family. Today she too works seven days a week tending to her business.
The euphoria over owning a new car only lasts so long.
Many Brazilians, including Rocha, face a heavy debt burden with higher interest rates. After buying an apartment and a car, she has been unable to pay off her credit card bill, store debt and personal loans, and is now on a credit watch list.
While unemployment remains near historic lows, the specter of job losses looms as businesses including retailers and carmakers begin to cut back.
“It was as if these people were overpromised a future that didn’t arrive,” said Renato Meirelles, head of research firm Data Popular, which surveys Brazil’s middle and lower classes.
“When it became clear that the growth we saw in 2010 was actually the peak and not just the beginning, people began to worry that their hopes for the future would not be realized.”
For Rocha, those hopes included renovating her home. Others in the neighborhood planned to open a small business or enroll their children in modest private schools.
To be sure, many Brazilians are sticking with Rousseff. Her Workers’ Party maintains strong loyalty among poorer and rural Brazilians, who are the main beneficiaries of government welfare programs, housing subsidies and educational grants.
“The poor are still a very, very big group, and even if she loses some ground there, it will provide her with a means of support,” said Carlos Melo, a political scientist with business school Insper in São Paulo.
Silva’s rise in opinion polls could also slow or even reverse as she comes under attack from rival candidates and lays out her policies in greater detail.
But Rousseff, who just over a month ago seemed a safe bet for re-election, is undoubtedly in a tough fight.
According to a new poll by research firm Datafolha, 35 percent of people with a household income of between two and five minimum wages - near the bottom of the new middle class - would not vote for Rousseff under any circumstances, up from 27 percent late last year. The number rises to 44 percent for those who earn five to ten minimum wages.
Similar trends have unfolded in other developing countries such as India, where anger among the emerging middle class over slowing economic growth helped launch Narendra Modi, a former tea peddler, into power earlier this year.
Economic stagnation has not affected everyone in Jardim São Luis equally but frustration runs deep over the quality of public services such as schools, daycare centers and healthcare.
And two months after the World Cup soccer tournament, resentment is still simmering over the billions of dollars the Rousseff government spent to host the event.
As Jose Ides, an out-of-work salesman and lifelong Jardim São Luis resident, put it, “When the people ask for another hospital or a school they can’t find the money. But when someone wants to build a stadium, there it is.”
While the amount spent on stadiums pales in comparison to Brazil’s social spending, the World Cup highlighted the weakness of public services and for many is a symbol of skewed priorities.
“You have a population of poor people and here we are putting on a show,” Ides said. “That’s where Dilma lost my vote.”
Editing by Todd Benson and Kieran Murray