Latin America has been perceived as the eternal promise of development given the abundant natural resources, good climate, and a growing middle class. According to the World Bank standard for income categorization, the region has been part of the world’s middle-income statistics since the 1970s.
However, the acceleration of changes in the new economy, along with the digital transformation, Latin America is in danger of becoming even more distant and widening the poverty gap with the rest of the world as it faces a more competitive global environment.
If an investor in Latin America cannot open a business quickly, pay competitive taxes, have an infrastructure that allows him to produce efficiently, sell through digital channels, and compete with efficient delivery logistics, that investor will go to the part of the world where he can do so and still sell to the Latin American market.
The Latin American middle class, an opportunity in the development axis
Since the 1990s, several countries have entered the upper-middle-income range on the World Bank’s scale. By 2019, Brazil, Mexico, Colombia, Argentina, Peru, and Chile have a per capita GDP (measured PPP) of over 13,000 USD. At this income level, the region has an urbanization rate of over 80%, reflecting a Latin American population with a strong middle-class urban life, where basic needs are met, and consumption becomes aspirational.
The middle-class in Latin America has been growing rapidly, representing about 30% of the population today. This is similar to the level of China and much more significant than India’s 3%, according to the World Bank. Traditionally, Latin American families tend to undertake small businesses and developments, which are an opportunity if they have the conditions to integrate into the global market under competitive conditions. On the contrary, they can suffer losses if they don’t fit into the necessary competitive environment in the new digital economy. The regulatory and infrastructure framework is vital to be competitive.