In Latin America, the middle class grows

Jeff Tyler Jan 23, 2013

In Latin America, the middle class grows

Jeff Tyler Jan 23, 2013

While inequality has increased in the U.S. following the housing bust, it’s a different story south of the border. A recent report from the World Bank found a 50 percent increase in the middle class in Latin America in the last decade.

Angelica Hernandez is one of those who recently joined the middle class.

In Mexico City, she works as an executive assistant at the University Museum of Contemporary Art, where she earns almost one thousand dollars a month.

She’s come a long way from the poverty of her youth. When she was a child, her family lived for awhile in a shack with a dirt floor. And they often didn’t have enough to eat. Sometimes, the family sent Angelica to beg for food from relatives.

“They gave me a little pot and sent me to the family of my dad to see if they would give us food. And sometimes, they didn’t give it to me,” says Angelica.

She couldn’t afford an education beyond the fourth grade. But she learned from her mother.

“She always told me to save. Save, so you can buy clothes and shoes and things. I only had one pair of shoes at that time,” says Angelica.

She now has plenty of options for footwear; she owns something like 70 pairs of shoes.

The World Bank report defined middle class in Latin America as a person making $10 – $50 a day, with little risk of falling back into poverty.

But for Angelica, it’s her consumer buying power that she thinks classifies her as middle class.

She calls herself “middle class because I’m not limited. I’m not without anything. If I crave something, I eat it. I buy it.”

According to the World Bank, the Latin American middle class grew from 103 million people in 2003 to 152 million people in 2009.

Brazil, Columbia and Mexico made the most progress.

Some of the upward mobility is just luck. Broad economic growth driven by a commodity boom has meant more jobs.

Other key factors influencing upward mobility include higher levels of education among workers; smaller families; more people living in urban areas; more people employed in the formal economy, instead of working under the table; and more women like Angelica joining the workforce.

“It’s a really impressive and big deal,” says Augusto de la Torre, chief economist for Latin America at the World Bank. “You have a very significant decline in the proportion of the population that’s poor. And a very significant expansion of the fraction of the population that’s middle-class.”

He says this comes after decades when there was no significant change in Latin America’s social structure.

Rising prosperity could have ripple effects outside Mexico. Consider the impact on immigration to the U.S.

“A growing middle class in Mexico is the reflection of more employment opportunities in Mexico, and rising purchasing power of incomes in Mexico,” says de la Torre. “To the extent that the middle-class expands, it is reflecting better economic opportunities. And therefore, less incentive to seek a greener grass elsewhere.”

And a growing middle-class in Latin America creates new opportunities for U.S. businesses.

“It is becoming an attractive place for investors all around the world,” says de la Torre. “Part of this is the rise in the purchasing power of the poor. The rise in the purchasing power of the middle class. The aspirations of the middle class.”

Angelica Hernandez had her own aspirations as a child.

“I dreamed of a beautiful house, with windows and electricity and a floor. Not a dirt floor. I wanted to live in comfort,” says Angelica.

Enjoying a meal of chicken mole and rice with her mother and husband, Angelica no longer has to worry about food. And that house Angelica dreamed of? She now owns it.

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