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ARTICLE: “Adios to poverty, hola to consumption: Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class,” The Economist, 18 August 2007, p. 21.
Interesting piece on the growing middle class of Latin America. Turns out they want stuff just like every other middle class in the world.
We’re not talking big money here. The couple profiled manages a bit over a grand per month in income between their two jobs. But the defining characteristic here is disposable income, with the actual amount being relative. What a Brazil calls a middle class would be, as this article argues, more like America’s lower middle class.
Make Mexico and Brazil happen in this regard, and you’re working half of LATAM’s entire population--bam!
These trends are furthest advanced in Chile. But they are most dramatic in Brazil and Mexico . . . In Brazil between 2000 and 2005 the number of households with an annual income of $5,900 to $22,000 grew by half, from 14.5m to 22.3m, while those receiving less than $3,000 a year fell sharply to just 1.3m. In Mexico . . . the number of families with a monthly income of between $600 and $1,600 has increased from 5.7m in 1996 to 10.7m in 2006.
Similar trends are emerging in Colombia and Peru, and Argentina, which lost a chunk of its large middle class with the recent national financial crisis, but is recovering nicely, with local economists estimating that 40% of families meet the criteria of middle-class, up from only 20% at the height of the recent nasty collapse.
More:
In Latin America as a whole . . . some 15m households ceased to be poor between 2002 and 2006. If the trend continues, by 2010 a small majority in the region will have joined the middle class, with annual incomes above $12,090 in purchasing-power-parity terms. In Mexico some 15m out of 27m households could have middle-class incomes by 2012 …
The reasons for this recent boomlet? Mix of high commodity prices, driven by Asia and China in particular, with job growth more concentrated in the formal sector this time around. Plus some innovative, Bill Easterly-approved social programs, like paying families to keep kids in school. Perhaps biggest is low inflation, thanks to governments eschewing deficit spending and the cheaper price of imports thanks to trade liberalization.
Overall, a very encouraging report from
The Economist.
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