Latin America’s Wealthier Base of the Pyramid

> Posted by Center Staff

How has Latin America and the Caribbean’s (LAC) market at the base of the pyramid (BoP) changed during recent years? Tuesday, the Inter-American Development Bank (IDB) released a new report exploring this question. Among the findings, the research revealed that the BoP market (those living on less than $10 per day) has grown 22 percent in a decade, going from $623 billion in 2000 to $759 billion in 2010. This increase wasn’t the result of demographic changes, but of economic growth. The per capita income among the BoP in the region increased at 2 percent annually across the decade, while that of the overall population remained relatively constant. What does this mean? A lot of things, including that there is a growing opportunity for companies to offer products and services to this population segment that have long been unavailable to them.

The report presents information on the size of the BoP market, its social-economic characteristics, market segments, consumer preferences, spending patterns, and demand-related factors. The report also looks at the supply side of the BoP market and analyzes the types of business models, distribution channels, and input sources that have successfully engaged this population segment.

Here are some of the report’s main findings:

  • Roughly 70 percent of the region’s population or 405 million people are part of the BoP market.
  • BoP individuals in LAC are increasingly more urban, connected, educated, and have more disposable income for discretional expenses.
  • The portion of the BoP classified as “poor” (living on less than $4 per day) decreased from 59 to 45 percent between 2000 and 2010, while the portion classified as “vulnerable” (living on $4 to $10 per day) increased from 41 to 55 percent.
  • Between 2000 and 2010, the segment’s discretional expenditure increased by 33 percent, representing 18 percent of total household expenses.
  • The largest shares of the BoP population’s budgets are food ($209 billion annually), housing ($184 billion annually), and transportation ($82 billion annually).
  • The BoP segment is looking more like middle-class families, with the average household size decreasing and the average age of household members increasing.
  • Companies can pursue the Latin American and Caribbean BoP market through existing distribution channels or by creating new ones with a local focus.
  • By 2020, incomes among those at the BoP in LAC are expected to grow by 10 percent, so with graduations into the middle class, the segment is expected to be 6 percent smaller.

Of the report, Lourdes Gallardo, a Senior Specialist at the IDB and co-author of the report said, “This is a practical tool for business, financial institutions, investment funds, and entrepreneurs interested in the existing market opportunities in the base of the pyramid segment.”

For more on the report, access it in English or Spanish, here.

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