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Middle-class growing strongly in Latin America

Latin America’s Middle-class increased by 56 million since 1999 with a direct consequence on consumption patterns and demand for government policies, according to a report in the latest edition of the United Nations Economic Commission for Latin American and the Caribbean, ECLAC Review.

“This represents a formidable increase of the consumers’ market”, according to the ECLAC newsletter featuring expert analysis on issues such as changes observed in the middle classes in recent years, and the “China effect” on the region’s exports.

The greatest expansion of the middle class, –described as people earning at least four times the poverty line–, took place in Brazil where 38 million climbed to that condition in the last ten years, totalling 61 million middle class Brazilians.

In contrast Argentina’s middle class has experienced a decline from 56% to 52% of the total population. Guerrilla-torn Colombia has gone through a similar process. In the rest of the region there was an overall advance which in some cases has meant that some families averaged 15.000 US dollars annually.

“The expansion of the middle class has not been a phenomenon restricted to Latin American but rather is a global tendency”, says the ECLAC report. An estimated 1.3 billion world population can be categorized as such, mainly because of advances in China and India.

The advance of this income group which is expanding at a rate of 70 million people annually will help consolidate a universe of 2 billion middle class by 2030, equivalent to 30% of global population.

But the advance of the middle class also has an impact in education which is devalued as a potent instrument of the social ladder. In effect “even when access opportunities to higher education have improved, at the same time there has been a relative devaluation of job and income opportunities for those who manage to complete secondary education”, underlines the ECLAC report.

The ECLAC review also includes articles on financial systems and investment financing systems in the region, factors affecting wage inequality, MERCOSUR as an export platform for the automotive industry, a new concept about social stratification and two studies on Brazil: one on the country’s sugar sector and alcohol, and another on the effects of fiscal policy.

In the “China effect” on commodity prices and the value of Latin American exports, Professor Rhys Jenkins from the UK University of East Anglia, estimates the contribution of the rise in Chinese demand to the price increase of the 15 main commodities exported from this region.

Professor Rhys concludes that depending on the estimate used Latin America has earned between 42 and 75 billion dollars as a result during the period reviewed, 2002 to 2008.

Finally, the article ‘Variability and consistency in commodity prices in Latin America’, the ECLAC economists Omar Bello, Fernando Cantú and Rodrigo Heresi research commodity price patterns in relation to external shocks. They conclude that, over the past 50 years, prices have displayed considerable variability, and that the shocks that affect them tend to be highly consistent.

Contact the Gateway to South America team  to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Uruguay and Chile, providing expert advice on property acquisition and investment tours.

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