After suffering a reputation for some of the highest levels of income inequality in Latin America, a strong middle class in Colombia is emerging.
That is what President Luis Villegas of the National Association of Colombian Business (ANDI) told reporters in Pereira on Thursday, the organization confirmed with Colombia Reports.
“It’s a new Colombia that emerges,” Vilegas told local reporters with newspaper El Espectador. “It demands a lot… pays its taxes, and does not tolerate corruption.”
In the past 15 years, Colombia has pulled 12 million Colombians out of poverty, according to Villegas. And it has reduced unemployment to single digits for the first time in years. Colombia’s GINI coefficient, a measure of the country’s inequality, fell 5% over a decade, from an index value of 58.7 in 2000 to 55.9 in 2010.
Good fiscal and monetary policies, according to Villegas, are what stand behind the good times for the middle class. He thinks the changes come from a stronger peso, which has let Colombians access more capital, durable goods and services previously unavailable to the masses.
Durable goods, especially cars and motorcycles, claimed Villegas, are more accessible now than they were 15 years ago.
Villegas also listed a more vigorous competitive sector; consistent, long-term macro-economic policies; and social spending from revenues earned off of oil and mining royalties as contributors to Colombia’s middle class swell.
The World Bank has praised Colombia’s macroeconomic maneuverings throughout the reverberations of the global financial crisis. To some extent, the country’s policies have helped nurture Colombia’s middle class rise. But Human Development Economist Jamele Rigolini worries that a good deal of the rise also comes from a commodities boom that has been fueled by China’s industrialization.
“That is coming to an end,” he told Colombia Reports during a telephone interview. “So you have to find new sources of growth. And moving from a time of commodities-fueled growth to different sources of growth is the most challenging part.”
Rigolini thinks that improvements in education and institutions is the greatest challenge for countries like Colombia, which dependent on the commodities cycle’s high. For 2013, the Colombian government earmarked $13 million for education spending in 2013, spending almost as much on schooling as it does on war.
For the middle class, however, Colombia is still a relatively expensive place to be. Compared to its neighbor, Ecuador, the costs of urban living are remarkably higher.
Jorge Romero, an Ecuadorian says he travels regularly to Bogota to sell appliances there, taking advantage of the rising middle class demand. But he also suffers from the high costs of living when he’s in the capital.
“In Ecuador, a bus to Quito from my city near the Colombian border costs $5,” says Romero. “But here in Colombia, that’s how much you spend on taking a taxi 40 blocks through the city.”
Strong socio-economic structural barriers in Colombia still block the entrance into the middle class. The country still suffers from severe rural poverty conditions, where 7 million Colombians still remain trapped, reported El Espectador. And according to the World Bank, 8.5% of Colombians lived on less than $1.25 per day – what the Washington-based financial institution considers extreme poverty. Compared to Mexico (~2%) and Brazil (~6%), Colombia is far worse.
Gizette Lemus’s story is a good reflection of the challenges the middle class in Colombia faces. As a young woman, she used to beg for money from strangers on the streets of Medellin. Now, with a family in Bogota, she is educated and determined. Over the last 5 years she says she feels that there are far more opportunities to make a salary above the minimum in Colombia, but the costs of living have increased as well.
Corruption, too, says Gizette gets in the way of people who want to ascend from the middle class on their merit. The Colombians call this vortex of informal power system ‘palanca’.
“If I want to get a great job, it is more difficult for [me as] a woman,” said Lemus. “And if you don’t know someone important to help you to enter a good job, it is even more difficult.
Sources
- Telephone Interview with ANDI
- Interview with Gizette Lemus
- Interview with Jorge Romero
- Cerca de 27 millones de Colombianos han mejorado sus ingresos (El Espectador)
- The Little Data Book 2013 (World Bank)
- GINI Index Data (World Bank)