Adiós to poverty, hola to consumption

Source: http://www.economist.com/displaystory.
Date: Aug 16th 2007 .

Vocabulary
1. Breeze-block: a light concrete building block made with cinder aggregate; "cinder blocks are called breeze blocks in Britain".
2. Depot: a bus station.
3. Fourhold: in fourfold measure.
4. Sewage: the waste matter that passes through sewers.
5. Grinding: the act of grinding.
6. Club: to gather or form into a clublike mass.
7. Shantytown: a section, as of a city or town, characterized by shanties and crudely built houses.
8. Sewerage: a system of sewers.
9. Ply: to run or travel regularly over a fixed course or between certain places, as a boat, bus, etc.
10. Nadir: the lowest point; point of greatest adversity or despair.
11. Abjured: to renounce or give up under oath; forswear.
12. Pampered:
To indulge with rich food; glut.

Summary
This article is abouta faster growth, low inflation, expanding credit and liberal trade that are helping to create a new middle class in Latin America. Signs of progress are all around. New tower-blocks, of the kind ubiquitous in the smarter parts of São Paulo, now jut up from among the houses of what still resembles a favela, or shantytown. Public services are improving fast: nearly everyone has electricity, piped water and sewerage. Smart new school buses run by the municipal government ply up and down the hillsides. And the mood of optimism is palpable.
They are members of a new middle class that is emerging almost overnight across Brazil and much of Latin America. Tens of millions of such people are the main beneficiaries of the region's hard-won economic stability and recent economic growth. Having left poverty behind, their incipient prosperity is driving the rapid growth of a mass consumer market in a region long notorious for the searing contrast between a small privileged elite and a poor majority. Their advent also promises to transform the region's politics.
The kind of people who call themselves middle-class in Latin America tend to be at the top of the scale: prosperous professionals with several servants, children at private schools and holidays in Europe or Miami. From the 1940s to the 1970s, state-led industrialisation and the growth of public employment saw the rise in some Latin American countries of a middle class of managers, bureaucrats and a labour aristocracy of skilled workers. But the policies that pushed them up proved unsustainable; they were abandoned after the 1982 debt crisis, which triggered a decade of mediocre growth and high inflation. Since then, partly because protected industries were subjected to privatisation and import competition, this group has struggled.
The middle class that is emerging now is very different. It is more accurately described as a lower-middle class. Many of its members have small businesses, like Mr Gonçalves. Others act as consultants to larger concerns.
In Mexico, argues Jorge Castañeda, a political scientist, some of the new middle class come from the informal economy, others from new industries or service businesses. The class is less concentrated in Mexico City and is rougher-edged, culturally and socially, as well as darker-skinned, shorter and more Mexican-looking than its predecessor, he says.
These trends are furthest advanced in Chile. But they are most dramatic in Brazil and Mexico, which between them account for more than half of Latin America's 560m people.
Something similar is starting to happen in Colombia and Peru. In Argentina the decline of what had been a predominantly middle-class country until the 1970s reached its nadir in the economic collapse of 2001-02, when a majority of Argentines fell below the poverty line. But a rapid economic recovery has been mirrored in a revival of the middle class. Ernesto Kritz, a labour economist in Buenos Aires, reckons that around 40% of Argentine families, up from 20% in 2003, have the monthly income of $1,000 that he sees as necessary for a middle-class lifestyle.
Several factors lie behind these trends. The first is that, since 2004, the region's economies have grown at an annual average rate of 5%. That is not spectacular, but it is not bad (the population is growing at only around 1.4% a year). And the growth is having a bigger social impact than in the past.
In the early 1990s Latin America saw a burst of growth driven by an inflow of capital and accompanied by overvalued exchange rates. This combination tended to boost the relative price of non-tradable services, and the incomes of those in the informal economy. This period is different, says Guillermo Perry, the World Bank's chief economist for Latin America. Exports are booming, partly because of high prices for Latin America's raw materials. But the export growth also follows a round of devaluations and two decades of market-opening economic reform. This time the growth is generating more jobs in the formal sector. In Mexico the economy grew by 4.8% last year and created 900,000 new jobs—in line with the growth of the labour force. In Brazil, too, the proportion of the labour force employed informally is starting to shrink.Another new element is innovative social policies. In both Mexico and Brazil, one family in five now receives a small monthly stipend from the government, provided they keep their children in school and take them for health checks. Lastly, in some countries remittances from Latin Americans who have migrated help their poorer families back home. The result is that in both Brazil and Mexico the incomes of the poorest half of the population are growing faster than the average. In both countries poverty is falling steadily, and income distribution is becoming less unequal. In Mexico, although growth has been only moderate, poverty, defined as income insufficient to feed a family, fell from 37% to 14% over the decade to 2006.

Personal Reaction

I was really happy when I read this article because it was opptimistic with regards to the economy in Latin America. It seems that the lower classes are beginning to increase their incomes a bit more. What is particularly stricking about this middle class is that they are proffesionals. They have gotten a degree to be able to find a better job but the different situations of the third world countries did not allow them to grow. I think that there is no clear cut between Middle classes and Low classes. Nowadays, people are rich or poor. No way out.
In one of the paragraphs, the article mentions the Argentinian growth economically speaking. It says that a family income has incredibly increased in comparison with the 2003 crisis. Today we can see this is true but prices are going up every minute, so salaries go up and prices too. What is the difference? We gain more money but we spend even more. I hope this changes in time. Otherwise, more and more people will not be able to have enough food and supplies for surviving.