By Narayan Ammachchi
Latin American economies have successfully wriggled out of their troubles and the gulf between rich and poor is narrowing by the day, according to the research institute of the Swiss banker Credit Suisse. The manufacturing and services sectors are strengthening and creating a lot of jobs, but the primary driver of the region’s economic growth has been the expansion of the middle-class, the report found.
The middle class in the region 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 highlights investment opportunities in wide-ranging sectors including e-commerce, retailing, financial services, and energy.
Latin American countries are no longer prone to recurrent financial crisis, rampant inflation, stagnation and persistent impoverishment, Credit Suisee noted.
“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,” says Stefano Natella, Co-Head of Securities Research & Analytics.
Under-investment in infrastructure, low savings ratios and poor education are among the key issues threatening to hinder growth in the years ahead.
In its recent study, the Inter-American Development Bank also stated that persistent weakness in the region’s education system had become a major barrier to global competitiveness. The IDB report said that “Latin America will take 21 years to reach the standards set for countries of Organization for Economic Co-operation and Development (OECD) in math education.”
Although several countries in the region are making significant improvements in their educational systems, the most impressive are happening in Ecuador. Ecuadorian president Rafael Correa, who received his university education in Europe and the U.S., has tripled the country’s public education budget since coming into office in 2007. In addition to emphasizing improved teacher training and building modern schools, his government is building several new universities that he hopes will put the country at the forefront of Latin American countries.
Overhauling the education system could enable the region to continue the growth that has seen the middle-class expand and created tens of thousands of jobs. The next ten years will be crucial to consolidating the gains that have been made over the past two decades, the report noted.
Credit: Near Shore Americas, www.nearshoreamericas.com; A new university under construction north of Quito.