Colombia is one of the South American countries with a relatively small middle class in the contemporary world. The country’s economy has improved in the past two decades, a condition that exposes the insecurities in the nation’s economic and social situations. Even though Colombia has experienced a series of financial stabilities, the state’s status quo remains a significant concern. The relatively small but growing middle class in the country has only profited to a limited portion.
Alejandro Gaviria, a former dean of economics at the Andes, researched Colombia’s middle-class crises. According to the study’s outcome, more than two million Colombian households graduated from poverty but emerged into the middle class over the past ten years. Currently, the middle-class population stands at twenty-eight percent (28%) of the country’s total population.
Reviewing the size of the middle class in Colombia is essential because the data can be used to estimate the financial and business prospects in the country. To understand the economic stability, stock exchange market rates, growth stimulation, and social and political growth in Colombia, it is significant to analyze its middle-class population.
Middle-Class Size in Colombia
The size of middle-class people has evolved in Latin America from 2000 to 2018. The percentage median income rates of Latin Americans are distributed on a scale of fifty to one hundred and fifty. Fifty percent of Southern Americans fell in the middle-class category in 2011, with the majority of the countries ranging from 45 to 55 percent. Colombia, for example, has experienced a gradual rise in the number of middle-class populaces.
Colombia’s middle-class stagnation of the country’s economy leans on the irregular social class classification in the country. In 2012, the economy of Colombia grew by about six percent due to the rise of the relatively low middle-class population from 2008 to 2011. Dube & Forero (2020) highlight that the average population of wealthy (rich) people in Colombia is 1.4 million; the poor form the more significant bit of the population with a record of 17 million (Rasch, 2017). However, the focus population formulates 14 million of the nation’s total population.
Middle-class people are considered to be earning between $1100 and $5500 monthly. The World Bank uses different parameters to group people into various social classes; the financial parameters of citizens indicate the social disparities in Colombia. The minimum wage in the country is set at $380 per month, a figure that translates the high inflation in the country’s stock market on a global scale (Dube & Forero, 2020).
Critical features that distinguish the social class from the wealthy and poor characterize middle-class syndrome in Colombia. The heads of middle-class families in Latin America have higher education compared to lower-class family heads. In Colombia, middle-class families are more educated than the people grouped in the lowest social class in the society. Moreover, most middle-class individuals in Colombia work in the private sector: meaning, employees in the social class are not in the public sector.
Stock Market in Colombia
The stock market’s performance in Colombia helps financial analysts determine the country’s social status. The business parameters collected in 2020 by the World Bank reported Colombia’s percentage year-on-year stock market return at 10.71% (Uribe et al., 2017). All development indicators compiled from reliable sources in Colombia facilitated the World Bank to determine the social stratification in the region.
For easy understanding, Dube & Forero (2020) stress that the growth rates of the annual stock index define the stock market return. In the case study, the World Bank financial analysts and experts took the average of the country’s daily stock indexes to determine the grouping of people according to their income across its major cities. Some of the indicators used in calculating Colombia’s stock Market performance include but are not limited to GDP, labor, health, money trade, housing, government, taxes, prices, and business.
The GDP per capita and growth from mining, transport, utilities, construction, and agriculture in Colombia stabilize the percentage year-on-year stock market return. The Gross Fixed Capital Formation (GFCF) from 2000 until 2021 is averaged at 32271.64 COP -13824 (Dube & Forero, 2020). The country’s total population stood at 50.88 million as of 2020, and the GDP per capita was $5332. 77 Unlike in Mexico, the Growth in Domestic Product in Colombia is $271.3 billion (Rasch, 2017).
The annual growth rate of Colombia stands at 6.8%; the indicators of stock market performance report issued by the World Bank in 2020 depicted the probabilities of the country’s GDP annual growth rates. According to Dube & Forero (2020) six-point eight percent increment in the country’s GDP growth rates masked out the benefits of the increasing middle-class population. In 2022 Colombia’s stock market; the corporate tax rate is 31%, while the personal income rate is 39%.
Uribe et al. (2017) highlight that Colombia’s consumer confidence reduced from -13.5 points in 2021 to -17.5 points in 2022. Furthermore, the country’s government debt to GDP increased from 52.8 to 62.8 percent between 2021 and 2022 (Dube & Forero, 2020). The balance of trade in the state is currently $-1.83 billion; the amount has reduced from $-2.39 billion in 2021. The country’s inflation rates have reduced from 1.67 to 1.63 within the past two years.
Financial and Business Prospects
The convening services, knowledge, and packages of financial prospects in Colombia are reliable courtesy of the World Bank. The country’s financial prospects lean on the political preferences of the citizens. President Ivan Marquez, for instance, set entrepreneurship, legality, innovation, and environmental sustainability as the key pillars of cross-cutting the nation’s GDP.
According to (Gómez-Navas & Serna-Dimas, 2017), Colombia has a promising record of microeconomic and fiscal management. The government, alongside private investors, is working towards attaining a flexible exchange rate in the stock market. According to the country’s treasury department, implementing rule-based fiscal frameworks will allow the country to achieve steady growth and an uninterrupted economy. The policy space provided by well-wishers, sponsors, and the government will help the country to increase its average annual income.
Middle-class families will rise with the attainment of stable economies. An increase in the population of middle-class persons translates to lower poverty rates. Therefore, the gradual growth rate of middle-class persons in the country will help Colombia fight poverty. A rise in middle-class families means an increase in wealthy classes. World Bank fiscal reports highlight that the business growth rates in Colombia will rise with the changing policy spaces incorporated in growing lower-class families into middle-class categories.
Conclusion
The Colombian government is playing a pivotal role in growing the middle class. First, the country is focusing on providing quality and inclusive education across the country. The gap between low-class and middle-class families originates due to the disparities in education. However, incorporating eligible education systems and programs would help build the middle class. Secondly, the provision of employment to youth in public sectors will help the government of Colombia to grow the middle class.
Currently, the private sector dominates employment opportunities; if the government centralizes employment in the public sector, youth will gain more employment and join the middle class. The country will protect the middle class with the need to stabilize the economy. Creating policy spaces, more employment opportunities, and quality education will help Colombia build the middle class.
References
Dube, R & Forero, J. (2020). COVID-19 Derails Latin America’s Bid for Middle-Class Prosperity: The region faces a record GDP decline this year and will likely lag behind other emerging markets in any recovery. The Wall Street Journal. Web.
Gómez-Navas, D., & Serna-Dimas, A. (2017). From Old Colonial Estates to New Modern Suburbs: The Emergence of the First Middle-Class Neighborhoods in Bogotá, Colombia (1925-1945). Journal of Urban History, 43(6), 979-999. Web.
Rasch, R. (2017). Measuring the middle class in middle-income countries. In Forum for Social Economics (Vol. 46, No. 4, pp. 321-336). Routledge. Web.
Uribe Mallarino, C., Ariza, K. L., & Ramírez, J. (2017). How we got here: the transition of Colombia’s middle class in social mobility perspective. Arts and Social Sciences Journal, 8(5). Web.