Nearshore Americas

Study Highlights Growing Purchasing Power of Latin America’s Middle Class

The purchasing power of Latin America’s middle classes is growing rapidly, making them a lucrative business target, according to new a study by business intelligence firm Euromonitor International.

Of the 171 million households in Latin America in 2013, 36.4 million had an annual disposable income below US$5,000 and 64.1 million had an annual disposable income below US$10,000.

Although the individual spending power of these households is small, Euromonitor says, the lowest-earning 10% of households in 13 Latin American countries had a combined spending power of US$77 billion in 2013.

The growing strength of the middle class in Latin America has been making headlines recently, but there is no clear evidence that this has raised FDI inflow into the region.

According to a recent speech from the World Bank Group President Jim Yong Kim, the number of people in the middle class has for the first time surpassed those living in poverty. “Poverty in Latin America has fallen by half to 12.3%. The middle class — currently 34% of the population — is growing,” he stated, according to Huffington Post.

The Euromonitor says engaging with these middle class people early on can produce long-term benefits. “These consumers, once won, can be transferred up the value chain from the initial low-priced purchases to high-margin products and services.”

The report states that middle class households in the region often prioritize education and health, but this prioritization is not uniform from country to country. Middle class families budget 10.1% of their income for health goods and medical services in Argentina, but in Mexico the proportion is just 3.1%.

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“Middle class consumers are interested in convenience and are increasingly willing and able to pay for it — good customer service, a wide product range of high quality goods with a nod to design will have broad appeal,” said Sarah Boumphrey, Euromonitor’s Head of Countries and Consumers Research.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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