Growing middle class in Lat Am -- at least some parts (July 22, 2015)

As a whole, Latin America's income gap fell over the past decade, according to a new report by the Pew Research Center. But the growth of the middle class in the region is uneven, inequality was reduced far more in South American and Mexico than in Central America and the Caribbean.

South America’s middle-income population grew 11 percentage points, from 16 percent of the region's total population in 2001 to 27 percent in 2011, and the share of people who were poor dropped 10 points in the same time frame, from 17 percent to 7 percent, according to the report published earlier this week.

This growth was in large part fueled by commodities for export (such as oil, copper, iron, soybeans and beef), high commodity prices worldwide and a high demand of resources from China. All of which contributed to make South America one of three areas in the world (along with China and Eastern Europe) where the middle class population significantly increased, according to the report.

It's worth noting that a reversal in commodities prices is also now hitting the region's economies, as noted in a Wall Street Journal piece from yesterday.

But the economic status of people in Central America and the Caribbean went mostly unchanged from 2001 to 2011, according to the Pew Research Center report. The middle-income share of the population grew only modestly, from 19 percent to 21 percent, while the share that is poor declined by just 3 percentage points.

Economic growth is only part of the story behind the growth of the middle class though. Income redistribution policies and the decline of income inequality also helped expand the middle-income population, accounting for 26 percent of middle-class gains in those 15 years.

The decline in inequality in Latin America was spurred in part by social programs designed to aid the poor, through investments in health, education and other sectors. Conditional Cash Transfer programs, for example – like Bolsa Familia in Brazil or Oportunidades in Mexico – provided cash assistance to the poor if they met certain conditions, such as sending their kids to school, explains the report.

Yet inequality remains a central topic in the region (look at the protests generated in Ecuador, nominally because of a proposed modification in inheritance taxes and the overall message Pope Francis imparted on his recent trip).

"The main characteristic of inequality in Latin America is not that there are a lot of poor people, but that there are a few people who have a lot," said Juan Pablo Jimenez, an economist at the UN's Economic Commission for Latin America in an AFP story last month.

Latin America, a region of some 600 million people, is home to nearly 15,000 "ultra high net worth" individuals, or people with fortunes of at least $30 million, according to the piece. The number rose 5 percent last year, while the number of billionaires rose to 151, a 38 percent increase, according to the piece which cites a consultancy report by Wealth-X.

And in Central America the numbers can be more startling.

Guatemala is the Central American country with the most millionaires, 260, followed by Honduras with nearly 225, according to a Diario 1 article that quotes the same consultancy report.

These superrich also face growing scrutiny in countries such as Nicaragua, where 42.5 percent of the country lives below the poverty line but 210 ultrawealthy individuals control a combined fortune of $30 billion, equal to 2.5 times the country's annual economic output, reports AFP.

News Briefs:

• A Chilean judge ordered the arrest of two former army officers and five former noncommissioned officers accused in the 1986 killing of Rodrigo Rojas and the serious injury of a young woman. The two were set on fire by members of three military patrols during a protest in Santiago, reports the New York Times. The warrants are part of a continuing investigation into the burning, one of the heinous crimes committed during the 17-year dictatorship of General Augusto Pinochet. The case was reopened in 2013 when a human rights organization filed a criminal complaint in Chile on behalf of Rojas' family.

• Human Rights Watch says activists convicted in Ecuador of terrorism and sabotage for anti-government protests have been denied justice through political interference that has prevented judges from hearing their appeals under a new penal code.

• The Mexican national statistics board, published its preliminary homicide count for 2014. In parallel, the Executive Secretariat of the National Public Safety System (SESNSP) -- the government institution entrusted with compiling national crime data -- released its June monthly report, said Alejandro Hope at El Daily Post. Both the homicide count and the homicide rate declined in 2014. Murders totaled 19,669 last year, down almost 15% from 2013. The rate slipped back from 19 to 16 homicides per 100 thousand inhabitants. These were the best numbers since 2008, he explains. But don't celebrate yet, "three things should be remembered: a) the number of homicides in 2014 doubled the 2007 total; b) the homicide rate was four times higher than the equivalent US number; and c) violence is no longer declining."

• The drug-trafficking landscape has shifted considerably during the 17 months Sinaloa Cartel leader Joaquín "El Chapo" Guzmán spent in jail. Rival cartels have been vanquished, and infighting among factions in his own Sinaloa gang has killed dozens in the resort area of La Paz and Los Cabos on the Baja peninsula. A new and rapidly strengthening international cartel is waging a fierce battle against soldiers and police in western Mexico — a style at odds with Guzmán's more corporate-like Sinaloa, reports the Associated Press in a piece that explores the changing cartel landscape in Mexico.

• Mexican authorities retook control of Oaxaca's Public Education Institute, an education agency that was a bastion of resistance to President Enrique Peña Nieto’s education sector overhaul. Police were deployed to secure the agency's offices and its 4,000 employees were fired, a blow to a powerful, radical teachers union incensed by the education sector changes, reports theWall Street Journal.

• A Latin America Daily Briefing reader took issue with yesterday's post -- which covered a piece from The Guardian that portrays Ciudad Juárez as a now calm place. The international media in general has been making much of the "miraculous" change in the Mexican border city. That's because the homicide rate -- which was the highest in the world -- dropped significantly.InSight Crime reported in 2013 that in 2010 there were 3,622 murders in the city of 1.2 million people. That number dropped significantly by 2012, when the number dropped to 797. TheU.S. State Department reports that in 2011 there were 1,900 murders reported, while last year there were "only" 434. Yet, as the reader noted, that hardly makes Juárez a peaceful paradise. The Igarapé Institute's Homicide Monitor shows a rate of 61.1 murders per 100,000 inhabitants for 2012. The first week of this month was the bloodiest this year, with 13 murders in just six days, reports El Diario de Juárez.

• A judge ordered the president of Bolivia's soccer federation jailed on charges he diverted funds from a charity match, reports the Associated Press. Carlos Chavez, who is also treasurer of the South American Soccer Confederation, was sent to Bolivia's notorious Palmasola Prison in the eastern city of Santa Cruz. The federation's executive secretary, Alberto Lozada, was placed under house arrest in the same case.

• Venezuelan authorities arrested two retired Venezuelan military officers sought on drug trafficking charges, reports the Associated Press. An anti-narcotics task force arrested former National Guard Capt. Vassyly Villarroel Ramirez and former National Guard Lt. Robert Alexander Pinto Gil on Monday. Ramirez was named in an Interpol alert and was classified as a drug kingpin in 2013 by the U.S. Treasury Department. U.S. officials say he has ties to Mexican and Colombian cartels and has been involved with cocaine trafficking. Pinto, who previously escaped from prison is accused of leading local drug trafficking gangs.

• Florida-based Stonegate Bank signed on yesterday the first deal to set up a correspondent account in Cuba, reports the Wall Street Journal. Stonegate and Banco Internacional de Comercio S.A. signed the deal in Havana, seven months after new regulations allowing U.S. banks to open correspondent accounts at Cuban financial institutions took effect. Correspondent accounts allow banks to transact across international borders, often to move money on their customers’ behalf. In the next three to four weeks, once Stonegate's correspondent relationship with the Cuban bank is in place, the bank will be able to facilitate payments and transactions directly between the two countries. Many U.S. banks remain wary of dealing with the island, saying they want more regulatory assurances that they won't run afoul of U.S. law if they do business in Cuba, reports the Miami Herald. Mastercard and American Express have said that they are willing to process card transactions by American travelers to Cuba, but without support from U.S. banks the plastic won't work on the island.

• The Brazilian Federal Police indicted the president of Odebrecht group, Marcelo Bahia Odebrecht, on suspicion of active bribery, money laundering, bid rigging and crime against the economic order, within the scope of Operation Lava Jato, investigating corruption in the state run oil company Petrobras. The report made by federal official Eduardo Mauat da Silva points evidences of bid rigging and payment of bribes regarding at least seven Petrobras works. It also points a suspicion of operating a scheme within the state company to sell naphtha, the main raw material of plastic industry, at prices below those commonly charged for Braskem, the petrochemical arm of the Odebrecht group, reports Folha de S. Paulo.

• Brazilian President Dilma Rousseff's popularity slumped to a new low and support for her impeachment grew amid a deepening corruption scandal and a severe economic downturn, according to an opinion poll published yesterday, reports Reuters.

• Argentina's peso slumped to a nine-month low in the illegal street market as growing speculation that the opposition candidate is unlikely to win October's presidential election fueled demand for dollars as a safe haven, reports Bloomberg. Investors and savers are increasingly demanding hard-currency assets on concern the next administration will keep the policies of President Cristina Fernandez de Kirchner, who has overseen a 50 percent depreciation in the peso in the past three years amid lackluster economic growth and inflation exceeding 20 percent.

• On Monday, two labor union leaders from the Peruvian city of Casma were shot coming out of an organizing meeting, one of whom was killed. They were shot because they prevented mafia members from charging fees at a large highway project in the north coast. A total of fourteen construction union leaders have been murdered in the last five years, but there has been no response from the government, reports TeleSur.

• Peruvian government anthropologists will try to will try to make contact for the first time with a clan of Mashco Piro Indians, an Amazonian tribe that largely lives isolated in the jungle, reports Reuters. They will seek to understand why they have been emerging from the forest. In the past year, the Mashco Piro have appeared in populated areas more than 100 times, especially along the banks of a river where they gesture to passersby. The encounters have not all been peaceful -- in May, a group of Mashco Piro attacked the native Machiguenga community of Shipetiari, killing a young man with an arrow. Peru prohibits contact with the Mashco Piro and another dozen "uncontacted" tribes, mainly because their immune systems carry little resistance to common illnesses. Luis Felipe Torres, the head of the state isolated tribes team, said the government will not forcibly contact the Mashco Piro or try to change their nomadic lifestyle. "But we can no longer pretend they aren't trying to make some sort of contact," Torres said. "They have a right to that, too."