CIAO DATE: 03/2014
Fall 2012
Assessing the Impact of the New Middle Class on Politics and Democracy (PDF)
Elizabeth J. Zechmeister, Laura Sellers, Mitchell A. Seligson
A force for progress—or destabilization?
Not Poor, But Not Middle Class Yet
Luis Felipe Lopez-Calva
During the first decade of the twenty-first century, Latin America’s increasing prosperity and social progress have led analysts to conclude that historic change is taking place. Indeed, poverty in Latin America fell from 41.4 percent in 2000 to 28 percent in 2010, even at a time of global distress1—a result, in part, of both sustained economic growth and reductions in inequality. As a result, the focus in policy circles has switched to the role an emerging middle class can play in the region, both as an engine of growth and as the foundation for social cohesion and better governance. The key to understanding this shift is accurately defining the middle class in economic terms.
Latin America's Middle Class in Global Perspective
Jamele Rigolini
Latin America and the Caribbean is experiencing a dramatic surge of its middle class. In just a decade, the proportion of people in Latin America and the Caribbean with a daily per capita income (in purchasing power parity) between $10 and $50 a day went from around one-fifth to one-third. For the first time in history, there are as many people in the middle class as there are in moderate poverty (i.e., per capita earnings below $4 per day). This socioeconomic shift stems largely from the sustained rates of economic growth in the 2000s that in most—though not all— countries trickled down and generated higher incomes. But growth in the 2000s was not exclusive to Latin America and the Caribbean. While the industrialized world was facing a challenging decade, many emerging economies surfed past the global turbulences and continued to grow, lifting people out of poverty and feeding the ranks of their middle classes.
Brazil's Strategic Leap Forward
Thomas Shannon Jr.
During their meeting in Brazil in March last year, U.S. President Barack Obama and Brazilian President Dilma Rousseff discussed a plan to send 101,000 Brazilian students overseas to study science, engineering, mathematics, and technology-based disciplines. Announced soon after, the initiative, Science Without Borders, has signaled President Rousseff’s interest in marking her tenure by building a gateway for her country to the twenty-first century. Just before their tête-à-tête, Obama had announced his own plans to send 100,000 American students to Asia and promised to unveil a similar initiative for Latin America in Santiago, Chile—the next stop on his 2011 Latin America tour. During their Brasília meeting, both leaders talked about the importance of using education to improve national science and engineering capacity to drive economic development, promote social mobility and enhance innovation.
R. Evan Ellis
In the past decade, China’s expanding engagement with Latin America has captivated the attention of the region and the United States. Most of the focus, however, has been on whether the new trade and investment is good for the region’s long-term development, and whether particular Chinese activities, such as military sales and loans to Venezuela and Ecuador, threaten U.S. interests in the region. Lost are the details and dynamics of how Chinese companies and the Chinese government have adapted to doing business in the region. China’s new physical presence in Latin America is the product of a fast-growing commercial and investment presence. But as a consequence of that deepening relationship, Chinese companies and China’s diplomatic apparatus have become increasingly immersed in the business, social and political conditions in those countries—and in some cases are even shaping those conditions to suit their interests.
Maria-Eugenia Boza
There’s been an amazing revolution in the global commercial landscape. The developing world has emerged as one of the most promising wholesale and retail markets. Many of these regions in the past were valued primarily as a source of cheap labor—often in maquilas and sweatshops. Today they are seen as a source of new consumers.
Alicia Barcena, Franciso Rivera-Batiz, Georges Haddad, Rebeca Grynspan
Educational achievement has always marked and defined the middle class. Public policies that have led to mass access to education have led to a broad-based improvement in educational accomplishments, among them higher completion rates in secondary and tertiary education. This has led to more upward mobility in terms of earnings and types of occupation. Still, there has been an education depreciation effect. The higher the average years of schooling, the more demanding the labor market becomes in rewarding those educational achievements. Many non-manual jobs that require more schooling often see their rate of return to education deteriorate. As those non-manual jobs pay less for schooled employees, their workers fall below the income threshold characteristic of the middle class.
Workers of Polar Unite...In Defense of Capitalism!
Richard E. Feinberg, Carlued Leon
Over the past decade, Venezuelan President Hugo Chávez has expropriated some 1,000 firms of all sizes, both foreign-owned and domestically held. Yet one very large and highly visible Venezuelan company remains standing: Empresas Polar. The family-owned Venezuelan food and beverage sector–focused company survived by drawing on the support of workers, consumers and communities, managing to withstand the insults and pressures emanating from the presidential palace.
Will Old Age and Bad Health Bankrupt the Americas?
Elizabeth T. Capiero, David E. Bloom
This year, about 75 percent of those who die in the Americas will die of an NCD.1 Over 33 percent of these NCD deaths will occur in people under age 70 and thus are considered premature. Some 25 percent of all NCD deaths will occur among working-age people.2 Although the four main NCDs pose the greatest health burden, other NCDs—ranging from neuropsychiatric conditions (e.g., schizophrenia, depression, Alzheimer’s disease) to musculoskeletal conditions (e.g., rheumatoid arthritis) and sense organ disorders (e.g., cataracts, hearing loss)—are responsible for a large proportion of ill health, disability and human suffering. To complicate matters, many people with an NCD have more than one coexisting condition, greatly increasing both suffering and costs.3
Double Profit: Financing Consumers
Alana Tummino
Across Latin America, retailers, telecommunications companies and shopping malls are reaping the benefits of a growing middle class that is able to shop more and spend more. According to McKinsey & Company, Latin America is one of the largest emerging markets in the world with a combined GDP of $3.2 trillion, boasting triple the GDP per capita of China and seven times that of India.1
Richard Andre
The quality of Chile’s universities is well known across the Americas. Two of these—Pontificia Universidad Católica de ChileUniversidad de Chile—rank in the top five of the 2011 U.S. News and World Report list of the 100 best schools in the region. Unfortunately, high-quality education comes at a high cost. Chile has the second most expensive private university system of any OECD country, after the United States. And due to the lack of financial aid, Chilean families shoulder 85 percent of the cost of a university education—more than any other developed nation.Until recently, most Chilean youth accepted the cost of education as the price of social mobility. Gabriela San Martín, 24, considered a university degree a ticket to a stable, decent-paying job. She took out a government-financed loan, known as crédito con aval del estado (CAE), to pay for her studies in early childhood education at Universidad Andrés Bello.
Lauren Villagran, Mitra Taj, Taylor Barnes, Haley Cohen
Six days a week, María Felicitas Camacho Maya, 62, unlocks the door to Lilian Michel, a bright white salon in Mexico City’s upscale Condesa neighborhood. She slips a white smock over her blouse and checks her hair at an island of oval mirrors. América Luz Valencia, a 27-year-old manicurist, arrives an hour or so later, her stylish hair sleek as a black onyx blade. Once her first customer for a manicure walks in, she’ll clip, file and polish hands and feet for hours, sometimes without a break. Both the business owner and her younger employee are aspiring members of Mexico’s diverse and rapidly expanding middle class. They demonstrate the critical role working women now play in their families’ social mobility.
James Bacchus, Bernard K. Gordon
Do regional trade agreements weaken the global push for free trade? Yes: James Bacchus; No: Bernard K. Gordon In this issue: They waste energy and political capital. Reducing trade barriers makes sense at any level.
"Don't be afraid of bureaucracy. Turn it into an opportunity." According to Brazilian entrepreneur Edivan Costa, that has been the guiding phrase of his life and career. But he is the first to admit that in his country, it's easier said than done: Brazil ranks 126th out of 183 countries in ease of starting a new business, according to the World Bank/International Finance Corporation's 2012 annual Doing Business report.
That's why Costa founded SEDI, a company dedicated to helping new businesses navigate Brazil's often-frustrating bureaucracy. SEDI, the acronym for Serviços Especializados de Despachante Imobiliário (Specialized Forwarding Agent Services), offers one-stop shopping for businesses trying to obtain the federal, state and municipal licenses they need to operate. And that's a significant service in a country where, according to the Doing Business report, it takes an average of 13 procedures and 119 days to register and license a business. Certain businesses, such as a gas station, can require 120 separate licenses. It's one reason why 40 percent of Brazilian start-up businesses do not survive more than two years after opening, according to a 2011 report from Brazil's national statistics agency, IBGE.
Latin America's mortgage market — Human rights threats — Brazil's World Cup and Olympics readiness.
Luis Cubeddu, Camilo Tovar, Evridiki Tsounta
Since 2003, mortgage credit in Latin America has expanded at an annual rate of 14 percent (adjusted for inflation)—well above rates observed in emerging Asia but below the exorbitant rates seen in emerging Europe before its housing bust. The region’s credit expansion has been accompanied by burgeoning real estate prices and construction activity—now representing more than 6 percent of GDP, higher than in emerging Asia or Europe. Mortgage growth has been particularly strong in Brazil, where the five-fold increase in mortgage credit since 2007 has been accompanied by a near tripling of house prices in the main metropolitan areas.
It’s time to add another stop on Peru’s archeological tour. Chavín de Huántar may lack the vertigo-inducing majesty and mystery of Machu Picchu or the intriguing juxtaposition of the pre-Incan pyramid of Huaca Pucllana with urban Lima, but it has two other important traits: novelty and a dash of creepiness. The Chavín period existed from roughly 1200 B.C. to 500 B.C. and once stretched almost along the entire coast of Peru. The spiritual center was in Chavín de Huántar in Peru's Ancash region, the site of one of the period’s most outstanding temples. The dig has been led by Stanford University archeologist John Rick for over 18 years. Rick has been slowly peeling away the dirt covering the mysteries: a network of tunnels where he believes followers spent days underground; evidence of likely human sacrifices; and shards of delicately sculptured pottery still bearing the original paint. Also present on the archeological site are a circular plaza and El Lanzón, a ceremonial totem that has been restored to its original condition—perhaps the best-preserved icon of a major New World culture found so far.
Jose Luis Leon-Manriquez, Nnenna M. Ozobia
Central America is receiving more attention in the U.S. news media and from the U.S. government than at any time since the region’s civil wars and domestic insurgencies three decades ago. Unfortunately, the attention is negative. The focus has shifted from the 1980s Cold War battles of President Ronald Reagan’s administration to the violence associated with organized crime, drug cartels and street gangs (maras). In Drug Trafficking and the Law in Central America: Bribes, Bullets, and Intimidation, Julie Marie Bunck and Michael Ross Fowler—professors of political science at the University of Louisville—provide those interested in Central America, the drug trade and U.S. foreign assistance in the region with an invaluable tool for understanding the causes and implications of drug trafficking through an analysis of what they term the “bridge countries” of Belize, Costa Rica, Guatemala, Honduras, and Panama. The authors intentionally do not include Mexico, which they argue (correctly) involves a different dynamic both in terms of the strength or weakness of the state, and the nature of the drug trade.