Latin America’s Middle Class Rises on Two Decades of Growth, But Challenges Remain

Credit Suisse's Whitepaper

Fecha: 05 Feb 2014 · 16:35

Latin American economies have significantly narrowed the economic and social gap with more advanced economies

The middle class in Latin America grew by 50% between 2003 and 2009

Underinvestment in infrastructure, low savings ratios, a growing income distribution gap and education are some of the key challenges

The next ten years will be crucial to consolidate the gains made over the past decades

The Credit Suisse Research Institute this week released a report entitled Latin America: The long road. The report looks at the growth trajectory of Latin American economies, explores their challenges and strengths on the road ahead, and outlines investment opportunities in the region.

The report highlights that over the last two decades, Latin American economies have significantly narrowed the economic and social gap with more advanced economies. The region has come a long way from the recurrent financial crisis, rampant inflation, stagnation and persistent impoverishment that in the past characterized many Latin American countries.

Along with the strengthening of the manufacturing and services sectors, which are creating domestic opportunities, a primary driver of the region’s economic growth has been the rise of the middle-income class. The middle class in Latin America grew by 50% between 2003 and 2009, from 103 million to 152 million people, or 30% of the population. This has profound implications for the economy as well as the investment environment.

The report provides context for the current macroeconomic situation in the region and outlines investment opportunities across sectors, including e-commerce, retailers, financial services, and energy. By evaluating the structural changes in Latin America and how each country stands relative to the developed world, the countries’ potential for growth is revealed – allowing for the identification of sectors that are likely to offer the greatest opportunities.

“The report outlines the long-term outlook for the region by taking an in-depth look at demographics, infrastructure, intangible infrastructure, employment, and macro conditions,” says Stefano Natella, Co-Head of Securities Research & Analytics. “While the region as a whole is in a much better position to absorb a serious shock, Latin American governments and societies still face considerable challenges.”

The report concludes that underinvestment in infrastructure, low savings ratios, a growing income distribution gap and education are some of the key challenges affecting the growth outlook for the region. The next ten years will be crucial to consolidate the gains that have been made over the past two decades.