August 17, 2012

Latin America: the risk is growing old before it grows rich

Check out the ideas of this post in a recent interview at Canal EL TIEMPO:

The coming decade will be the first in 200 years when emerging-market countries contribute more growth to the world economy than the developed ones. A phenomenon which is amazing both the developing countries and the emerging ones. No wonder the 20.000 multinationals that are already operating in the emerging markets expect to find there 70% of their future growth. 

The reason behind this unprecedented growth is the creation of a new middle class, whose needs, by the way, have little to do with those of the developed countries. Only in Latin America, the working-age population is projected to grow in 85 million people by 2040. And its relative youth offers the region a historic demographic opportunity, which will only last until the second half of this century, when its demographic profile will look more like old Europe's (working population shrinking while  providing for the growing proportion of older people).

Besides, the region is more urban than any other in developing markets (80% of its population lives in cities, while in China this figure is only 50%), linking heavily its future growth to the economic performance of the cities. Around 200 cities are expected to generate 65% of the region's growth over the next 15 years, but many of them have grown faster than their infrastructures, their transportation systems and some critical public services like water supply and waste water treatment.

In a few words, if we combine these factors (emerging market growth, new middle class, historic demographic opportunity and urban growth), the conclusion is bold: if politicians, institutions, companies and entrepreneurs didn't collaborate efficiently and failed to speed up the economic performance of the cities generating jobs in the formal economy, Latin America run the risk of growing old before it grows rich. The window of opportunity is wide open now, but it may last just for a couple of decades.