How will deceleration affect the middle class in Latin America?

Headlines in the international press are strong: Latin America is undergoing a situation of low economic growth which will extend through 2016 and, most probably, 2017 too.  

A group of international experts coincided with this appreciation during the online debate How will 2016 affect your pocket?, organized by CAF, Development Bank of Latin America, which analyzed the impact of this situation on employment, salaries, and purchasing power of Latin Americans.

Adriana Arreaza, CAF's Director of Macroeconomic Studies, explained, "Facing a deceleration, companies have fewer business opportunities. In addition, demand for employment would be lower, and salary increases could slow down. In summary, this scenario assumes a deterioration of family incomes". 

The fall in the prices of raw materials and a reduction in external financing, according to the expert, have weakened the currencies of the region, and this increases the prices of imports, leading to price increases and a reduction of the purchasing power of the people. 

Among the short and long-term policies that governments can implement to prevent the middle class from experiencing the worst effects of the current economic situation, are those related with worker training. 

Angel Melguizo, head of Latin America at the OECD's Development Center, stated "Latin America is the region with the greatest problems to find the needed workers. If we manage to provide the workers with the capacities required by the productive sector, we are talking about improvements in productivity and salaries. 

The role of SMEs in the generation of more and better employments was also discussed, as they are essential actors to dynamize growth and promote competitiveness. In the case of Colombia, for example, where SMEs represent close to 80 percent of employment, companies must increasingly compete with international products, which is a challenge and an opportunity to achieve more integration in the global value chains. 

Camilo Montes, manager for Bogota of the Asociación Nacional de Empresarios de Colombia (National Association of Colombian Entrepreneurs) explained, "SMEs in Bogota have a great opportunity of joining productive sectors that are growing, especially in the infrastructure sector. In addition, we need SMEs that take a leap concerning technology, as this could help make them more competitive". 

The debate also explored the measures that could help preserve the social accomplishments  achieved during the period of economic prosperity, from 2002 to 2013, when average growth rates reached close to 5 percent . 

According to Arreaza, in this respect public-private associations may be a good alternative to dynamize the regional economies, as certain pressures on the Treasury would be removed, and that would allow key investments in infrastructure to materialize.  

In summary, the experts admit that 2016 will be a challenging year for middle class families in the region. However, the situation also represents a challenge to promote the pending reforms and to achieve a productive transformation that guarantees sustained growth in the region, opening new opportunities for companies and workers.