Income and Expenditure in Latin America

November 2021

Thanks to rising commodity prices and the economy recovering from the pandemic, income and expenditure in Latin America are set to increase significantly over 2020-2040. The income gap between rural and urban households is expected to shrink due to increasing FDI flows dedicated to rural development; however, many challenges remain, including poor infrastructure, as well as limited labour market opportunities in rural areas. Income inequality will remain the highest globally.

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Key Findings

Disposable income is set to grow, but will remain among the lowest globally

Total disposable income is set to rise by nearly 80% in real terms over 2020-2040, as the regional economy recovers from the impact of COVID-19. However, average consumer income will remain among the lowest globally, due to the prevalence of sectors with low profitability, and a large informal labour makret.

Middle class is set to grow at the fastest pace

Owing to rising unemployment and elevated poverty, seven out of 17 Latin American countries are expected to see their lowest earners (social class E) expand at the fastest pace. Most of the other countries are, however, set to witness the middle class grow most rapidly.

The rising middle-class is playing a key role in mitigating large-scale income inequality

Even though the rising middle class is expected to help mitigate inequality in Latin America to some extent, the lowest income band is set to remain dominant, indicating that substantial income inequality will persist over the forecast period. As a result, companies will need to tailor their approaches to an increasingly polarised consumer marker.

COVID-19 to expand gender income gap further

Despite large-scale efforts in women’s empowerment from Latin American governments and businesses, the gender income gap is expected to increase over 2020-2040. Labour market informality, the negative affects of the pandemic, and persisting cultural stereotypes will continue to hamper female incomes.

Families and extended households to remain largest spenders

Even though the number of single-person households is growing rapidly, families and extended households are expected to remain the most prevalent type by 2040.

Introduction

Scope
Key findings

Regional Overview

Disposable income to increase, but not to its full potential
Low penetration of banking services to hamper COVID-19 support
Pandemic will further expand the gender gap by 2040
Rising demand for commodities to support economic growth

Regional Consumer Expenditure

Consumer incomes are further constrained by inflation
Income inequality allows leisure spending growth among wealthy
Less developed countries showing higher rates of inequality
Family-centric culture fosters prevalence of couples with children

Regional Distribution of Income

Population aged 65+ is set to see the fastest income growth
Income inequality remains the highest globally
Social businesses in the region continue to address poverty
Minimal tax redistributive policies contribute to income inequality
Urban/rural expenditure gap is set to shrink by 2040

Country Snapshots

Argentina: Share of income and wealth of the middle segment
Argentina: Middle-income households
Argentina: Essential spending by middle-income households
Bolivia: Share of income and wealth of the middle segment
Bolivia: Middle-income households
Bolivia: Essential spending by middle-income households
Brazil: Share of income and wealth of the middle segment
Brazil: Middle-income households
Brazil: Essential spending by middle-income households
Chile: Share of income and wealth of the middle segment
Chile: Middle-income households
Chile: Essential spending by middle-income households
Costa Rica: Share of income and wealth of the middle segment
Costa Rica: Middle-income households
Costa Rica: Essential spending by middle-income households
Colombia: Share of income and wealth of the middle segment
Colombia: Middle-income households
Colombia: Essential spending by middle-income households
Dominican Republic: Share of income and wealth of the middle segment
Dominican Republic: Middle-income households
Dominican Republic: Essential spending by middle-income households
Ecuador: Share of income and wealth of the middle segment
Ecuador: Middle-income households
Ecuador: Essential spending by middle-income households
Guatemala: Share of income and wealth of the middle segment
Guatemala: Middle-income households
Guatemala: Essential spending by middle-income households
Mexico: Share of income and wealth of the middle segment
Mexico: Middle-income households
Mexico: Essential spending by middle-income households
Peru: Share of income and wealth of the middle segment
Peru: Middle-income households
Peru: Essential spending by middle-income households
Uruguay: Share of income and wealth of the middle segment
Uruguay: Middle-income households
Uruguay: Essential spending by middle-income households
Venezuela: Share of income and wealth of the middle segment
Venezuela: Middle-income households
Venezuela: Essential spending by middle-income households
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