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Mexico: A Middle Class Country!

30 May 2011 One Comment

It is always more challenging to understand oneself that engange in analysing others. It is also more productive. So, how would an X-Ray picture of Mexico come out? According to Cárdenas, Kharas and Henao from Brookings Institution, Mexico is and will be even more, a middle class country.

Latin America is not currently a middle class place; the average size of the middle class for the region is 36.%, with data for 2005. But Mexico, along with only three other Latin American economies has a large middle class. In fact, more than half the population in 2005: Argentina 52.9%, Costa Rica 51.8%, Uruguay 55.8 %. In that same year, Mexico had already 60.1% of its population defined as middle class.

But, what is middle class and why is it so relevant besides justice or equality considerations? The authors define global middle class as those households with daily income/expenditures between $10 and $100 per person in purchasing power parity (PPP) terms. To understand more clearly the concept of global middle class; the lower bound is chosen with reference to the average poverty line in Portugal and Italy, the two advanced European countries with the lowest poverty line. The upper bound is chosen as twice the median income of Luxemburg, the richest advanced country. Defined in this way, the global middle class excludes those who are considered poor in the poorest advanced countries and those who are considered rich in the richest advanced country.

Comparisons are interesting in this case and even furthermore when reviewing the forecasts. Compared to Latin America, the Asian countries will underperform in terms of the relative size of the middle class in 2030. “ India will have the smallest share of the global middle class by 2030 with 15.8 % of its population, followed by China with 28.1%. While estimates calculate that the largest middle class will belong to Mexico with 79.9% to 86.5% of its population living with global middle class standards”.

This is the result of hard work. Chile and Mexico – are the two countries that have had the fastest reductions in inequality in the region– during the last two decades.

The implications of this description for investment and policy decisions are important. A buoyant middle class represents not only a link between it and the economic effects of consumption and growth. Middle class also focus its importance on values typically associated with this socioeconomic group, such as democratic attitudes, entrepreneurship, hard work and the importance of education. According to the Brookings study, these values, it is often argued, are crucial for the development process.

Additionally, the consumption boom that will be likely observed bring questions about whether goods will be imported or domestically produced, so industrial policy and structural change acquire a more relevant role today. As individuals, the most obvious trend is that higher a person’s income, the less a proportion of their wealth is tied up into their homes. Therefore, available for new businesses and investments, opening new opportunities.

This is the real Mexico, one of hard work that is paying off, and one of opportunities for its people. No wonder why it is chosen by more foreigners everyday as the ideal place to settle or visit. Mexico is not only a place of extreme beauty, but also of development and avant garde alongside its traditional way of living in community and highly regarded culture.

Are you really ready for this forecast? If not, start envisioning your investments in order to take advantage of a development that is already here, and for the one to come.

One Comment »

  • Jose Del Barrio said:

    A very objective report. As a matter of fact with information from the latest survey income-expense from INEGI, we may consider that 66.7% of Mexico’s population is already in the middle class sector. Nevertheless, 50% of such midlle class is in the lower level, so there are still many challenges ahead.

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