Tuesday, November 13th 2012 - 20:51 UTC

Latam rapidly turning into middle class continent, says World Bank

A World Bank report released Tuesday found that Latin America and the Caribbean registered a 50% jump in the number of people joining the middle class during the last decade, which was called by economists an historic achievement for a region long exposed to wealth inequality.

Middle class is defined as anyone making 10 to 50 US dollars per day

President Jim Yong Kim: one third of the population is still in poverty

The report, called “Economic Mobility and the Rise of the Latin American Middle Class’’, found that the middle class in the region grew to an estimated 152 million in 2009, compared to 103 million in 2003, an increase of 50%.

“The recent experience of Latin America and the Caribbean shows the world that policies balancing economic growth while still expanding opportunities for the most vulnerable can spread prosperity to millions of people,” said WB President Jim Yong Kim. “Governments in Latin America and the Caribbean still need to do much more – one third of the population is still in poverty – but we should celebrate this achievement of growing the middle class and learn from it.”

For decades, poverty reduction and middle class growth in the Latin America and Caribbean region (LAC) crept along at a very slow pace, as low growth and stubborn inequality held back progress. Over the last ten years, however, the region’s fortunes improved dramatically due to changes in government policies that emphasized the delivery of social programs alongside economic stability.

The end result: The middle class grew by a half to include 30% of the region’s population in 2009. Among the highest achievers were Brazil, which comprised about 40% of the region’s middle class growth; Colombia, where 54% of people improved their economic status between 1992 and 2008; and Mexico, which had 17% of its population join the middle class between 2000 and 2010.

Today, the middle class and the poor in Latin America account for roughly the same share of the population, according to the report.

The report found that some of the key factors favouring the upward mobility in Latin America were higher levels of education among workers; higher employment in the formal sector; more people living in urban areas; more women in the labour force; and smaller families. The report defined middle class in income terms of anyone making between 10 and 50 dollars per day. This level of income provides an increased resilience to unexpected events and reflects a lower probability of falling back into poverty.

The report, however, also described a fourth, vulnerable class, which underscored the need for countries to do much more to increase shared prosperity. Members of this vulnerable class, representing 38% of the population, fared better income-wise than the poor, but lacked the economic security of the middle class. Sandwiched between the two, the vulnerable class makes between 4 and 10 dollars per capita, per day.

The report also determined that, with the exception of years of schooling, intergeneration mobility remains limited. A young person’s parents’ economic and social background still plays a substantial a role in determining that person’s economic future.

This may change, however, according to Augusto de la Torre, Chief Economist for Latin America and the Caribbean at the World Bank. “A society with a growing middle class is more likely to reduce such inequalities,” he said. “It is widely recognized that the middle class is an agent of stability and prosperity. For a middle-income region such as Latin America’s, a larger middle class has crucial* implications.”

Around the world, a larger middle class can mean better governance, deeper credit markets, and greater spending in social sectors, such as public health and education. But this promise has not yet been fully realized for Latin America, explained the authors of the report. They cited historical reasons for that.

In the second half of the 20th century, the region’s small upper and middle classes had limited commitments to and expectations from their government; they were not asked to pay much in taxes and did not expect to receive much from public services. As a result the state was typically small and the middle class tended to opt out of public services, paying privately even for core services such as electricity and security.

While this picture has been changing in the past 10 to 20 years, the region’s fragmented social contract often keeps the middle class opting out, and unwilling to contribute to the public purse. This in turn reduces the opportunities for those who remain poor to join the recent entrants into the middle class.

The report identifies three strategies which governments could employ to gain the support of the middle class for a fairer and more legitimate social contract:

Explicitly incorporate the goal of equal opportunities into public policy to break the perception that the system is rigged in favor of the most privileged.

Embark on a second generation of reforms to the social protection system -- including both social assistance and social insurance -- to overcome fragmentation and thus enhance fairness and efficiency.

Break the vicious cycle of low taxation and low quality of public services by investing some of the region’s commodity windfall to improve the quality of public services, service and administration

This social policy debate on how to achieve greater buy-in from the wealthier segments of society is likely to remain a key topic in Latin America for the foreseeable future. To drive such discussion, the report concluded that the right set of reforms will results in the middle class becoming an increasingly powerful agent of change to expand prosperity to those left behind.


17 comments Feed

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1 Raul (#) Nov 14th, 2012 - 02:09 pm Report abuse
It is becoming increasingly clear that Latin American economic policies contrary to the Washington Consensus, Neoliberalism and the International Monetary Fund have enabled Latin America (Kirchner, Lula-Rousset, Correa, Chavez, Morales, Ortega etc.) Have brought political sovereignty, economic independence and social justice in Latin America.
The slogan is: For you to do well economically, disobeying the IMF and the World Bank.
The example is the crisis in Europe with the deepening of the economic crisis to further neoliberal IMF.

2 ChrisR (#) Nov 14th, 2012 - 03:17 pm Report abuse
1 Raul

Ha, ha, ha.

Argentina is doing OK? Ha, ha, ha.
Correa, Dead Man Walking Cahez, Morales: ha, ha, ha to the power Googol.

Brasil are already finding out it's a little more difficult than they thought and THEY are the only ones worth talking about. The rest are robbing their own people, one way or another.
3 Condorito (#) Nov 14th, 2012 - 03:19 pm Report abuse
Look at the numbers. Middle-class is being defined as USD 10 – 50 per day. The legal minimum wage in Chile is approx USD 12 / day. This makes all of Chile, except the 6% unemployed middle-class. ...I am sure they will all be delighted with their new status.
4 MistyThink (#) Nov 14th, 2012 - 08:06 pm Report abuse

please cut your longed curly hairs.
5 Nostrolldamus (#) Nov 14th, 2012 - 10:33 pm Report abuse

Hey, you are Brit. Remember your place. You come from a country, and a continent (Europe), that along with North America are seeing their middle class SHRINK.

Inept losers.
6 BAMF Paraguay (#) Nov 14th, 2012 - 10:35 pm Report abuse
#3 - Completely agree. Almost sounds as if the definition of middle class was defined so as to make Latam seem better that it really is. Someone making $10/day in the USA would be considered homeless....no no wait a minute even homeless people make about $70/day begging.

Paraguay's min wage is US$370/month or $12.36/day.
7 British_Kirchnerist (#) Nov 14th, 2012 - 10:48 pm Report abuse
Socialists bringing down poverty and inequality, who'd'a thought? =)
8 Forgetit86 (#) Nov 14th, 2012 - 11:30 pm Report abuse

Short but very good put down. May ChrisR now “know his place”.
9 BAMF Paraguay (#) Nov 15th, 2012 - 12:22 am Report abuse
#7 - Kinda like in the Soviet Russia.
10 Pirat-Hunter (#) Nov 15th, 2012 - 01:03 am Report abuse
I guess Cristina, Morales, Mujica, Chavez , Castro and Dilma aren't such bad guys after all!
11 toxictaxitrader2 (#) Nov 15th, 2012 - 01:07 am Report abuse
Expanding middle class in Argentina,no longer held captive by subsidies and handouts,restless under high income tax rates.
sounds like an own goal!
12 ChrisR (#) Nov 15th, 2012 - 10:43 am Report abuse
@5 Nostrolldamus & 8 Forgetit86

Which one is tweedledum out of you pair of losers, because the other one must be tweedledee.

Is that the BEST you can come up with when faced with the downright financial ruin of Venezuela by Action Man Chavez (soon to be dead AM) himself?

Correa hides in hospitals while he sets the Policia on his own people or magnaminously 'forgives' the owner of the paper that told the truth about his gangster ways: chip of the old drug-running cowardly father of his, he did commit suicide didn't he?

And yes, I am a Brit, BUT I live in the only decent part of South America, Uruguay.

Where do you pair of non-entities live and where do you originate?
13 Condorito (#) Nov 15th, 2012 - 01:24 pm Report abuse
By any definition of “socialism”, Europe is far more socialist than South America – just look at the tax take in each region for a general picture of the situation, or the far greater inequality in South America. It is precisely the minimal socialism here that allows the dynamism that creates the growth we are seeing.

If you in the UK want to emulate our growth you should be looking to slash your oppressive socialist overheads rather than just wishing your ills on us.
14 agent999 (#) Nov 15th, 2012 - 01:38 pm Report abuse
The unfortunate problem with this report is that the conclusions drawn are based on figures ending 2009/2010, also they are dependent on the “official” figures/statistics released by each government (INDEC ?).
15 Ayayay (#) Nov 15th, 2012 - 07:21 pm Report abuse
@7 Every scientific study I've seen correlates the pri ce of commodities with the rise of people's living standards. I.e. the price of an oil barrel tripled. Actually, in Venezuela, the decrease in poorest should have been much higher.
16 Srta.Sussie (#) Nov 21st, 2012 - 01:16 am Report abuse
#15 Isolde miedosa y asquerosa
what are you pretending?
Shut up....you are worthless
17 Axience (#) Nov 21st, 2012 - 11:48 am Report abuse
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