Social Market Development and Social Mobilization in the Value
Chain of the Construction Industry
Magalhães and Anaclaudia Rossbach
first time, there is widespread growth in the consumer market
due to an increase in the income of a social segment
traditionally excluded from the formal markets. An indication
appears in the major newspapers of a trend amongst some private
sector executives to invest in or start businesses to reach out
to the niche market characterized by low income communities.
intense debates have been taking place on the nature of the
middle-class, greatly attracting the attention of media and
society as a whole. The debates focused on changes in low
income socio-economic groups as the result of higher employment
rates and greater sources of income during this first decade of
the millennium in Brazil.
example in Brazil is the retail trade and financial agencies
segment. These companies provide credit for consumer goods to
low income families, compatible with their ability to pay. This
development raised industry interest in developing products
designed to meet the specific needs of low income consumers.
However, market development in Brazil is traditionally linked to
statistical instruments, such as prospective research on
consumer demand with the aim of assessing potential preferences
for products. Such special purpose consumer research studies are
usually carried out by companies and skilled professionals on
individuals from the middle social strata of the conventional
consumer market. The preferences of low income people are still
unknown in regards to many things.
in the value chain of the construction industry have been
underway since the late 1980s when the squatter settlements (favelas,
illegal allotments and cortiços) set up in the 1970s underwent a
spontaneous urban development with the replacement of dwelling
houses made of inadequate construction materials with brick
houses, and upper floors.
development was greatly enhanced by social mobilization
movements for better housing conditions for slum dwellers, like
the Movimento de Favelas de São Paulo and pastoral services who
advocated for access to water and electricity in some of the
city’s neighborhoods that had no formal acknowledgment.
our precariously built settlements have means of access to water
and electricity far better than their counterparts in African
and Asian countries. Additionally the quality of the houses has
improved significantly in the last thirty years, and it is very
difficult to find a favela in the country made of wood or of low
quality construction materials.
improved framework is a result of the synergy between the
government and social groups and has lead to an important
interface with the private sector that has hardly been
harnessed. Electricity and the construction materials are a
typical example of how the private sector has benefited from
social movement’s initiatives.
in the electricity sector (private sector today) there is a
scheme of cross subsidies by which the middle-class finances the
electricity social tariff, which is crucial to ensure the
sustainability of the electricity network, as well as its
potential expansion. The expanding market for electricity and
construction materials is evidence of how the private sector has
already benefited from social movement’s initiatives.
formal and regular electricity represents a significant
improvement in low income people’s living conditions, as it
reduces the risks of fire and domestic equipments damage, allows
access to electronic consumer goods, and strengthens social
inclusion. Even if it is initially subsidized, a first access is
another way of gaining a new client, and if the client’s income
rises, the client will no longer be subsidized and will
contribute more to sales revenues.
investment due to advocacy from social movements has driven a
trend towards housing quality improvements by encouraging the
tendency of low income families to invest in, improve and expand
their houses. This process has obviously taken place in a
disorderly fashion lacking technical evaluation and planning in
the public domain, leading to risky situations, excessive
densification and material misuse.
II. The present value chain
of the construction industry
consulting company Booz Allen Hamilton carried out a study for
construction materials associations. It showed that 77% of the
residential units produced in Brazil are based on
and are not built by the large construction companies. In other
words, the largest consumer of construction materials in the
country is the informal contractor who builds for himself or for
others without resorting to financial products and subsidies.
performed by ANAMACO (Associação Nacional dos Comerciantes de
Material de Construção) (National Association of the Building
Materials Commercialization Agents) reveal that self-managed
construction annually produces about 850 thousand units, 64% of
which are produced through self-financing.
difficulties in determining accurate statistical data on the
dynamics of the informal construction market, it may be inferred
from simple visual perceptions that the present Brazilian
favelas have masonry residential units that represent a
significant improvement from the time before the 1990s.
Nevertheless, even without carrying out field research it can
also be seen that the families plan to improve and enlarge their
units, as many are clearly unfinished, lacking outer finishings
indicating an upper expansion of the units. That is: it is a
market with a great expansion outlook.
companies, in a very creative way, have been working on the
development of specific products for the low-income housing
market; this is the case, for instance, with the BRASKEM
petrochemical company. BRASKEM, a producer of PVC, has been
investing significant resources towards the development of
products such as frames, bathrooms and entire houses from
constructive PVC technology. One of the research branches of the
company focuses on assessing consumer satisfaction based on
surveys carried out with consumers from favelas and low-income
imperative to distinguish between what is considered to be low
income housing by the private sector and the bottom of the
income pyramid in Brazil. The Getúlio Vargas Foundation (Fundação
Getúlio Vargas) has recently released a study that defines the
“new middle-class”, the middle economic strata represented by
families with an income ranging from R$ 1,064 to R$ 4,591.
51.9% are in this income bracket. However, the Pesquisa Nacional
por Amostra de Domicílios – PNAD reveals that households with an
income lower than this bracket represent about 40% of the total.
That is: the
middle income strata has growing purchasing power, but the
bottom of the pyramid with low purchasing power is still
significant and should not be ignored.
of residential housing by the formal market is still in its
initial stages. It is a market in need of development and
maturing, since the final cost of the property and the
maintenance costs of the products supplied are still very high.
In the middle strata, households with an income range of 1,000
to 4,000 reais still have to deal with limited long-term
borrowing capacity and low savings, which are obstacles to asset
acquisition. Regardless, houses available through the formal
market are closer to the lifestyle and preferences of the
traditional middle-class than the needs and preferences of the
low-income housing market.
it can be argued that the construction materials market is
larger than the formal real estate market. The construction
materials market can serve people in the majority of income
brackets, from the slum dweller who buys material to build or
enlarge his house, to those in the upper economic population
strata; the formal housing market is only trying to target the
III. The social organization
potential of demand prospecting
the large social movements associated with housing have focused
on housing provision to meet demand, rather than specific
matters pertaining to urban infrastructure improvement.
Additionally, with the expansion of the democratic management
processes of the cities, the main movements started to intervene
intensely in government policies through mechanisms such as
housing committees and participatory budgeting.
organizations expanded across the country and are represented in
several councils and bodies of participatory management and
formulation of public policy. They bring together a significant
number of low income families with expectations of access to
these national organizations that traditionally act on matters
related to housing, community mobilization initiatives have
emerged, operating in specific locations. They work on
gathering information and resources about the community as the
key strategy in promoting social and economical development.
instance, the main goal of SDI – Slums Dwellers International in
Brazil is to improve housing conditions by organization and
community mobilization, especially through savings community
groups and self-enumeration.
Through self-enumeration the residents of a community have a
better chance of getting to know the geographical features of
the place where they live, as well as the socio-economic
conditions of the households.
information gathering carried out by the community itself is an
important driving force of organization and community
mobilization, in addition to providing an important input for
grant negotiations and housing projects. Savings groups situated
in the municipalities of Osasco and Várzea Paulista, in the
Greater São Paulo area have already demonstrated positive
results in negotiation with their local governments. This has
resulted in infrastructure projects and production of housing
units, in addition to units such as crèches, health care
surgeries and community centers.
groups are still very recent in Brazil, but have shown in other
countries a high potential to generate housing projects in
partnerships with governments and in some cases with private
social movements in Brazil participate in broader negotiations
with several levels of government. This is the case with the
Social Housing Program of the Federal Government, a housing
provision program that is jointly structured with the social
movements, Ministério das Cidades (Ministry of Cities) and Caixa
Econômica Federal (publicly owned bank, financial agent for the
Federal Government). In an unprecedented way this program uses
information provided by social movements to design a housing
program to suit the dynamics of communities.
an enormous potential to develop housing projects based on
inputs provided by social movements. So far, in Brazil, the
information held by social movements has been strongly
encouraging government actions with little resort to market
projections carried out by the Ministério das Cidades and
CEDEPLAR - Centro de Desenvolvimento e Planejamento Regional (Universidade
Federal de Minas Gerais), point to an estimated 26 million new
homes needed by 2023. Of this, 60% is represented by segments
presently excluded from the formal housing market. This niche
constitutes the target audience for the main social movements
that fight for housing rights in Brazil, and a potential new
market for innovative private sector actors.
We have seen
that in Brazil, the social movement’s advocacy for improved
housing conditions has contributed in an indirect way to private
market expansion, namely in the electricity and construction
sectors. By recognizing the potential represented by the
information on families, consumer dynamics, needs and
preferences that are held by social movements, social
organizations can actively contribute to market expansion. By
providing access to this insight, social organizations enable
companies to generate revenue and improve living conditions,
triggering a virtuous circle for society and the economy as a
There is a
pressing need for the market to adapt to the characteristics of
populations attempting to integrate into the formal economy; the
adjustment may take long. Our fundamental claim is that the
market adjustment to serve low-income consumers can be
successful at significantly higher speed if it is based on the
mobilization and information gathering potential of social
organizations, and reaches out to the government, whose
investments and incentives may propel further expansion of the
market and social sectors.
people’s movements and the market can indeed promote superb
synergies that will lead to market expansion, product
development and technological innovation. The alliance of
social movements and private sector will become more important
over the third millennium. Although achievements have been made
to influence public policies, there is still a lot to be done.
the National Housing Secretary, Brazilian Ministry of Cities.
Anaclaudia Rossbach is an Ashoka Fellow and founder of
Interação (International Network of Community Action).
Translation Note: Auto-recenseamento:
Self-enumeration refers to the completion of census
survey questionnaires by the respondents themselves