RIO DE JANEIRO — For the past two years, rainy Saturdays meant a steady stream of customers to a Renault auto dealership in this seaside city. Rio residents eschewed the beach to open up their wallets during the good economic times.
But last Saturday, the eight Renault salesmen were as lonely as the proverbial Maytag repairman.
"People are afraid to buy," said salesman Robson Coriolano, taking a break from watching a car race on television. "Nobody knows how long the crisis will go on."
The financial implosion that began in the United States has spread to Brazil, ending a three-year economic boom for the world's 10th largest economy. Amid the boom, millions of Brazilians joined the middle class and began to enjoy the fruits of American-style consumerism.
Premium content for only $0.99
For the most comprehensive local coverage, subscribe today.
Those heady times have all but disappeared.
Sales of cars, new apartments and home appliances plummeted in October, as did exports. Interest rates have surged, and credit has dried up for some industries. Soybean plantings have fallen, the stock market has tanked and value of Brazil's currency, the real, has sunk 25 percent compared to the dollar. Analysts now expect economic growth for 2009 to drop 40 percent below original projections.
Ordinary Brazilians suddenly find themselves pondering an uncertain future.
"Everyone is worried," said Kelly Almeida, a nutritionist who decided she couldn't afford a new living room couch. "We don't know how bad we'll be hit."
As recently as two months ago, record foreign reserves, low inflation, solid growth and a healthy budget surplus prompted Brazilian President Luiz Inacio Lula da Silva to say that the financial crisis would bypass his country.
"The press is always asking me about the American crisis," Lula said. "I say: Ask Bush. It is his crisis, not mine."
Now, it's not only Lula's crisis but Marcelo Vasconcelos' as well.
Vasconcelos is selling 1,200 new apartments in a development known as Reserve Park. In a fast-growing Rio neighborhood five miles inland from the coast, the project features swimming pools, tennis courts and volleyball courts, as well as two- and three-bedroom units costing $150,000 to $200,000. The target audience: first-time homebuyers, who have entered the market in droves over the past two years with easier access to borrowed money.
Two months ago, Vasconcelos predicted he'd sell 500 units in the first week. He has now lowered his sights to 200 or 300.
"People are afraid of taking on debt," Vasconcelos said, as he sat in the showroom lobby for Reserve Park. "Many people are talking about the crisis, and the crisis has only begun. I'm afraid that people will panic, and the crisis will worsen."
For now, economists say that Brazil's economy is not saddled with toxic real estate loans and remains fundamentally strong. Instead of Brazil growing at 5 percent in 2009, they now project growth of about 3 percent.
"I don't think it will be a major crisis for Brazil," said Regis Bonelli, an economist at Rio's Getulio Vargas Foundation. "Brazil's economy is in much better shape than before."
Brazil has lurched from economic crisis to economic crisis over the past 25 years. Hyperinflation racked the country in the 1980s and early 1990s. Economic woes in other developing countries slammed Brazil later in the 1990s.
The economy has strengthened under Lula, a Socialist and one-time union leader who didn't graduate from high school. Ironically, the business community feared Lula when he took office in 2003.
Instead, Lula has mostly continued the pro-business policies of his predecessor, Fernando Henrique Cardoso.
Under Lula, Brazil has favored private investment, promoted Brazilian products abroad and liberalized lending rules to make it easier for the lower-middle class to borrow money to buy apartments, cars and refrigerators. Petrobras, the state oil company, dramatically expanded its reserves and profits.
Today, Brazil boasts $200 billion in foreign reserves — or nearly half the amount held by Latin American nations.
In the face of the crisis, Lula has promised to continue government public works projects. His government has approved rules to encourage banks to lend more money and on Thursday announced it will loan $1.9 billion to carmakers' financial subsidiaries to help boost sales in November and December.
Business leaders and ordinary Brazilians have praised the government.
It's not clear yet, though, whether these moves will prompt middle-class Brazilians to keep spending.
What is clear is that the economy needs help.
General Motors is idling two of its three Sao Paulo automobile manufacturing plants and partially halting production at the third one, a company spokesman said.
Sales at the Renault dealership in Rio plunged from 354 vehicles in September to 130 in October.
"If this continues, we'll have to lay off people," said sales manager Marcos Paulo Pinto.
One of the few customers on Saturday was Jose Luiz Natal, a 39-year-old dentist looking at a 2006 Ford EcoSport.
"My biggest concern is getting a good interest rate," Natal said, as he examined the SUV. "I'm afraid of what will happen in the future."
Buyers of yellow taxi cabs from Shopping do Taxi in Rio now have to pay three times as much to finance the purchases as they did in September. They also face a more rigorous credit-worthy standard.
"Business was marvelous," said general manager Marco Thomaz. "But now I'm worried. Everybody in the automobile industry is worried."
Casas Bahia, a consumer chain that helped spark a consumption binge on home appliances and furnishings by offering favorable credit terms, has suddenly become less appealing.
Maria dos Santos, a 57-year-old cleaning lady, was hoping to buy a refrigerator at Casas Bahia at a Rio mall on Sunday. But the refrigerator now costs 25 percent more than it did 15 months ago if dos Santos finances the purchase.
"Everyday it's harder to buy things," she said.
Plywood exports for Bruno Stern's company have plunged 40 percent this year.
"U.S. and European construction markets are in such a slowdown that sales have dried up," Stern said.
Brazilian exports overall had been growing at a 30 percent clip for 2008 before they flattened in October.
Jorge Augusto de Castro, vice president of Brazil's Foreign Trade Association, expects exports to fall by 5 percent in November compared to October.
"The biggest problem is the lack of credit," said de Castro. "The government is trying to free up credit for exporters."
De Castro added that the credit crunch is hurting export plans for early 2009.
Analysts expect another factor to contribute to slower growth in 2009: higher borrowing costs for those who can find willing lenders.
Andre Rebelo, research director at the Sao Paulo manufacturers association, said interest rates have doubled for many companies that want to borrow money for upcoming projects.
Rebelo said that would cause many companies to shelve investment plans.
Still, many Brazilians remain optimistic in a country that even during the worst of times seems to have a bounce in its collective step.
Renato Oliva, president of the Brazilian Bankers Association, said government intervention has caused the credit crunch to begin to diminish.
"Confidence is being re-established," Oliva said.
While sales may be lower than projected at Reserve Park, many potential buyers remain gung-ho.
Jorge Jose Hilario, a 57-year-old owner of a private school bus, eagerly followed a saleswoman first into a model two-bedroom apartment at Reserve Park and then into a three-bedroom one.
Hilario, wearing a polo shirt, shorts and sandals, peered into all of the rooms and nodded with satisfaction.
"There are warning signs on the horizon," Hilario said afterward. "But whether there's a crisis or not, this is a good investment. You have to invest in something solid, like real estate."
MORE FROM MCCLATCHY: