During pandemic, number of Brazil’s millionaires fell but inequality rose – study

RIO DE JANEIRO, BRAZIL – Despite the coronavirus pandemic, the world closed 2020 with an additional 56.1 million people with wealth over US$1 million, about 10% more than the 50.9 million recorded the year before. Conversely, Brazil has 108,000 fewer wealthy people than in 2019.

The information is contained in the Global Wealth Report 2021, prepared annually by Credit Suisse bank.

Aggregate household wealth reached US$418.3 trillion, with an increase of US$28.7 trillion from one year to the next.

In Brazil, the trend was reversed: the country posted the greatest reduction in the number of millionaires among the economies evaluated by Credit Suisse. According to the report, 207,000 Brazilians had accumulated more than US$1 million by the end of 2020. They were 315,000 in 2019, a decrease of 108,000 – or 34% – from one year to the next.

One of the main reasons, according to the report, was currency depreciation – which caused a similar situation in other economies. India, Russia, and Hong Kong also posted a decrease, but to a lesser extent. In India, for example, the number of millionaires dropped from 764,000 to 698,000 from one year to the next.

Brazil also registered an increase in the level of income inequality, points out the survey. The country’s Gini index – an indicator that measures the degree of income concentration in a group – reached 89 in late 2020. The closer to 100, the greater the inequality. In 2010, the Brazilian Gini index stood at 82.2, according to Credit Suisse calculations.

Currently, the wealthiest people in Brazil – who make up 1% of the population – hold 49.6% of the country’s wealth, against 44.2% in 2000 and 40.5% in 2010.

This has not happened in other Latin American countries evaluated by Credit Suisse. In Chile, the accumulated wealth of the richest 1% fell from 40.1% to 33.6% between 2000 and 2020.

In Mexico, there was a drop from 42.8% to 31%. In both cases the Gini index changed little over the period. According to the report, “income inequality increased among the poorest 90% of the population, offsetting a decline in inequality at the top.”

Household Wealth vs Real Economy

“The contrast between what has happened to household wealth and what is happening in the broader economy may never have been stronger,” the report says of the increase in the number of millionaires in the world.

In retrospect, the report points out that the impacts of the coronavirus pandemic on economies were soon reflected in financial markets, with stock markets retreating worldwide. As a result, an estimated US$17.5 trillion was wiped out of aggregate household wealth between January and March 2020.

With the action of governments and central banks that ensued, markets regained confidence, and by the end of June 2020 most losses had been reversed. That was “understandable,” according to the report.

“But what happened in the second half of 2020 was unforeseen. Stock prices continued on an upward path, reaching record levels by the end of the year,” the study says. “Real estate markets were also affected by the prevailing optimism, and real estate prices increased at rates unseen in many years.”

The mismatch between these movements and the real economy has clear motives, according to Credit Suisse. “Many governments and central banks in the most advanced economies, anxious to avoid the mistakes made during the global financial crisis, have taken preventive actions,” the report says.

First, they organized massive cash transfer programs to support people and businesses most affected by the pandemic. Then, they lowered interest rates – to near zero in some cases – making it clear that they would remain that way for a long time.

As the Brazilian figures show, the results of these policies were not the same all over the world. Latin America was the worst performing region, with total wealth plunging 11.4% or US$1.2 trillion. “With major economies hit by the pandemic, this would not be a surprise,” the report says.

But the exchange rate effects were also high. Were it not for the depreciation of currencies, the decline in wealth in Latin America would have stood at 1.8%, less than that recorded in India.

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