 A rapid-paced discussion around the importance of the middle class, we are awaiting the minister who is in the middle of a press conference, but the former has asked us to go ahead and commence without him. Let me just make a couple of introductory comments. We are absolutely all seeing how the shift of manufacturing in emerging markets, how the resource and mineral riches in emerging markets, how the talent in emerging markets is building a very rapidly growing middle class, incredibly important. Ernst and Young has done some research on this and we see the middle class growing over the period between now and 2030 up to five billion people. We see the purchasing power and the demand from the middle class increasing from 21 trillion U.S. dollars to as much as 56 trillion U.S. dollars in that time period. I think this objective for our panel is to talk about really two things and then branch into whatever topics and questions are on your mind. One is how will we continue as a society to meet the needs and to meet the expectations of this rapidly growing middle class and how will we make sure that we actually do achieve this rapidly growing middle class because it is so important. Got a great panel here. I'm going to ask them each to introduce themselves in just a one minute intro. Your name, what you do. If you're so inclined, share something about yourself that the audience doesn't know. Make it fun. Gail, why don't we start with you? We'll just go down this way. My name is Gail Becker and I am the chair for Canada and Latin America and the west coast of the United States for Edelman. We are a global public relations firm. We have about 62 offices around the world, including a strong presence in Latin America. My name is Hernando de Soto. I'm Peruvian. I chair a think tank, which doesn't think too much lately, but acts in different parts of the world. I come from Arequipa. We're all middle class. My name is Augusto de la Torre. I am the chief economist for Latin America and the Caribbean at the World Bank. I guess one of the reasons why I'm here is that my office last year published a report, the name of which is economic mobility and the rise of the Latin American middle class. So we are responsible for the percentages that you might see around here. My name is Carl Lippert. I'm from a beer company called Sabmula. I'm the president for Latin America. I must confess up front that we love this topic of the middle class. We have a different definition from the World Bank as to who the middle class is for us. Everybody drinks beer is considered the middle class. We're happy to talk about this topic today. My name is Marcelo Neri. I'm the minister of strategic affairs in Brazil. I'm also the president of the Institute of Applied Research, I'm a professor at Fundação de Turavargas where we did some research on the so-called Brazilian new middle class. I agree completely. Everyone thinks it's middle class, so I think this is very interesting. It's different from the poor. When we talk about the poor, we talk about someone else. When we talk about middle class, everyone thinks him or herself as the middle class. It's interesting. Well thank you all. We, as I said, the minister will be joining us and we would have turned to him first, but Augusto, maybe I'll turn to you first since at the World Bank you have researched this, you've looked across Latin America for some time. You know, what have been the key drivers of this middle class growth and how do we make sure it continues? With respect to the drivers, one might classify them to be groups. One has to do with the dynamics of employment and economic growth and what happens in label markets in particular, and the other has to do with redistribution and social policies. On a fairly first approximation, our estimates is that growth and employment played a much larger role in the growth of the middle class over the past 10 years than redistribution. Redistribution and social policies played a bigger role in terms of people living poverty. And we have to remember that more than 70 million Latin Americans have left poverty over the last 10 years, so it has been a major poverty reduction decade. About 50 million Latin Americans enter our definition of the middle class, which is of course somewhat arbitrary and we can discuss that. And that was driven more by employment dynamics, growth dynamics. One can also argue that the expansion of consumer credit may have also helped and in some countries the strong influx of remittances may have also helped. These are the drivers and what's I think very significant is that those drivers were deemed but they were present in the 1990s and yet we didn't have the type of social progress we had in the 2000s. So there was something in the 2000s that clicked and obviously growth may be one of them and that's why people people have asked often how sustainable is this phenomenon given that the last 10 years were the result of a significant amount of good luck. We argue that there were also some good policies now and then but good luck played a big role, particularly commodity price boom and you had a incorporation of China into the world economy as a big partner for Latin America, particularly South America and then you had this very liquid financial international environment that may have helped. So the question before us is whether this phase of social transformation and growth in the middle class may rise. Final point, we do record and document a big expansion of the middle class that doesn't mean that Latin America is a middle class region. It is a middle income region and there's no one-to-one corresponding between being middle income and being middle class. In fact if you look at the map of countries classified by per capita income you will see many middle income countries but very few of them can be considered middle class. If for instance you say a middle class society is a society where at least 40 percent of the population, 50 percent of the population is middle class by some accepted definition. Thank you. You raised a lot of really provocative thoughts in that response. The importance of employment versus policies, the importance of consumer credit, difference between middle income and middle class and Mr. Minister, thank you for joining us. We were asked to go ahead and start. I'll come to you in a second as you feel the flow. Hernando, maybe I'll come to you because when I heard Gusto speak about credit, when I think about middle class, I think so much about the work that you've done. It raises issues of informal versus formal economy. Just react to some of the things you've heard so far. I saw you jotting down notes frantically. Yes, short memory as time goes by. So I know I thought that definitions of Gusto were very helpful. I think the crucial definition is it said let's make a difference between income and sustainability. I mean it might not only be about income and in fact you know if you if you read into the industrial revolution which is when the West gets a sizable middle class it is the result of a large part of the population that is needed to administrate the division of labor. So in effect as we scale up as we start producing not only for local but we start producing for mass markets which comes with globalization that creates a stable structure for the middle class because the middle class complies with all that intermediation which you know comes across when you see the United States and you say wow this is the biggest agricultural producing country in the world how many people involved in agriculture? 1% and then everybody says my god we've got a problem here our manufacturing is going down 12%. What's the rest? The rest is administrating the division of labor, the division of knowledge etc. So that is what would seem to me to give stability to the middle class. Then the question would be applying this to countries like Peru or areas of Latin America how important is that middle class that's been growing in sustainable terms? And the reply may be as you talked about in terms of informality that it can come and go anytime. Our rural areas for example where in Peru we've been where a lot of our wealth is coming from minerals that were being found or the coast where there's agriculture taking place while there is another structure las comunidades, the communities and the tribes there will be no middle class because the middle class involves scale. The average community in Peru there must be about 8 million people living in communities maybe there are 8,000 communities and roughly that gives you 220 people per community which is more or less the amount of people that fit in the land Peru flight from Lima to Miami. So you've got 8,000 governments in Peru that are structured in such a way that there's not going to be a middle class. Why am I saying this it's because if you want a middle class to grow it's got to come from someplace. So either Cuban style you take the guys from the top down or you take the guys from the bottom up. So we can't keep on looking at communities in Peru it's simply a touristic attraction or something that keeps the faculty of anthropology going. So now why is this also important because if you look throughout the world the guys who are now rising in the Arab Spring and marching in the streets by the millions we've been working there as you know for about with with four governments are about 400 million people aspiring to be middle class but that work in small little covets where there is no connection whatsoever and they all they're all businessmen I mean all the guys who lit up are businessmen so one thing that it that tells you people do want to be middle class but it's not going to happen unless you break some structures. Second you mentioned China Augusto which is important according to Chinese official statistics their statistics there were 120 000 revolts by farmers against middle class people of the Communist Party with over 15 000 police casualties only last year so it isn't set when we get all proud about India I got nano technology information technology there you've got a big middle class of about 60 million people in the country of 1 billion 100 million people in China's in India still about 56 percent of them have as a prime source of energy cow dung so this middle class thing is important but it's not going to work unless you destroy the underclasses and their structures or the upper classes. You know it's uh it's an interesting juxtaposition when you talk about two ways together building middle class either you know build it from below or move it down from above I know how most of us would see this. Mr. Minister it is great to have you here and thank you for hosting us here in Peru it's been a wonderful world economic forum you know the topic being how do we make sure we meet the needs of the middle class how do we make sure we continue growing the middle class maybe just share some thoughts you know from the government perspective on on what economies can do to to address this and and to make it sustainable. Well thank you very much for the invitation I do I'm sorry for my the tardiness I was with ministers from the Alliance of the Pacific and we were discussing on ways to further integration so it was a good reason to be late so I apologize I think that this discussion is very relevant and it goes beyond the economic dimensions it goes has social political implications as well addressing your questions the sustainability of the middle class really there's one thing that will make it sustainable towards the future which is growth without growth you won't have a middle class you need stability with high inflation you won't have a middle class and I think something that in Peru and Peru and other Latin American countries has enabled a middle class to grow has been openness because openness in a way what it's delivered is a decrease in the price of imported goods so now nowadays more consumers have access to goods and services that they didn't have access because now they're cheaper because globalization has good effects in terms of efficiencies and we can import more things at better prices and hopefully good quality so definitely for us again without growth without us growing above six percent in a sustained way and obviously this entails investment productivity we won't be able to sustain this this middle class and another thing which I think is is helpful in the case of Peru and in this discussion whether it's bottom up or or the other way I think the nature of Peruvian middle class has made me compliment what Orlando said sorry I couldn't hear you completely I was catching my breath well well I was sitting here is that for us we consider our middle class not to be of the traditional kind but it used to be those migrants from rural areas that came to urban areas searching for opportunities and and and and those are those are the that's the thriving new emerging middle class in countries like Peru where all the dynamism of our eternal demand is based the consumption boom the expansion of housing the expansion of micro or financial services to this segment is has been that way and obviously this because we grew and we had stable policies yeah thank you Marcello from Brazil you know facing similar opportunities and similar challenges how do you look at keeping you know this middle class miracle and both the growth and meeting needs of the middle class how do you keep that going when you know demonstrably we're still in the middle of of difficult economic times globally I mean how do you see it I think the battle for keeping in middle class where it is and to grow will be played especially in the label markets the good news is that label markets are still going well at least in Brazil we are in full employment and that's quite a paradox since we had very low GDP growth but I think it's it's in the label market it has been more in terms of formal employment which I think was genuine and important the key aspiration of workers not so much in terms of entrepreneurship less than I would like it to be I think what Latin Americans want and Brazilians in particular is to have a stable job and this is what they are getting I would like them to want also to open a small business to grow but I don't see it it happen just one small point with respect to the this bottom up or top down in terms of definition I think when we talk about middle class we talk very much about US or European definition where you have you know like two cars two dogs two kids and I don't think this is a good definition in my life you stopped with that and didn't go to two spouses and two other things I mean so this I mean I think the we are having already two kids which are very important you know gives you sustainability but I think if we look into the US and to Europe we're going to see ourselves as poor I mean they are the richest one in the world so I'm very much in line with minister idea we have to look you know within our communities our countries and I think if we do that we find the world here because actually Latin America in terms of its income and it's inequality very high inequality but this is a very good picture of the world so I don't think we should import definitions from from developed countries otherwise we're not going to see ourselves moving we are doing you know someone who incomes change from one thousand to two thousand dollars if you look from top you see well nothing changing this guy's life I mean it's a revolution going on so I think it's and one last point I think will be very tough to respond to the aspirations of the Latin American middle class because we have very high aspirations Latin Americans are very positive towards their future so the governments have really it's more than if you control by income no one is more optimistic with respect to the future than Latin Americans so that this stuff very helpful and it's interesting you know Gail you come at it as well from a different perspective which is you know how do companies target this new middle class however we define it and you know what does this new middle class respond to if you will from messaging and product needs and so maybe comment on that from Edelman's perspective okay sure so I agree with what everyone had said so far and I think you know one of the questions that I have is what is business's role in terms of in terms of helping to unleash the power and fuel the progress of the middle class and I think Edelman releases a global trust barometer survey every year and in fact we release it at the world economic forum in Davos and this year if you look at the 26 I'm sorry 31,000 people 26 countries and we we measured three countries in Latin America and I think what's really interesting when you look at those those findings is where Latin America stood out in terms of the rest of the world is the gap between trust in business and trust in government so to your point yes the trust in business is extraordinarily high but the trust in government is extraordinarily low and what that and it's the largest gap in the world of all the 26 countries that we surveyed so I think what that really denotes is a tremendous opportunity for business to fill in those societal gaps and to lead and some businesses are taking advantage of that that's sort of one opportunity for business the other opportunity for business to your point is the way that we communicate with the middle class what kinds of what kinds of things do they want to hear how how do they want to be communicated to and perhaps most importantly what is it that they want to see from business today so when you when you when you look at some of the findings and you see the the importance of how they rank operational factors such as having a good business being on a list of well-known companies versus communicating transparency and communicating frequently treats treats employees well holds profits below customers on and on people the the expectation for people that they have in business is huge but the gap between what they expect and their and the and the perception of what they receive is actually quite low and that is a huge opportunity for business today to speak to these audiences in terms of communicating what what it is that they're not getting well Carl you're communicating to to the customers all the time you know at sad Miller and doing a remarkable job of it comment on on what you've heard from gale and also just the environmental issues that that come from middle-class rise I must say I strongly agree with what gale has been saying about the role of business factor feel quite lonely up here representing business I suppose but but I think there is an enormous job that we have to do particularly as as companies that sell consumer goods to educate because we have a we have a new middle class we have a group of people they don't know quite what is expected and how to fit in and what they can and cannot afford and what they should do and we have seen in the last couple of years that their spending patterns and the interaction with the with society and the environment has shifted quite profoundly what we have seen is a period of low interest rates and strong currency and we have seen the period where the this growing middle class now has been buying a lot of durable goods and semi-durable goods so cars and appliances etc because they want the things that we have they want cars and appliances they want comfort they want utilities and so so they want those things but we also know that as they want those things all of these things are quite resource intensive and putting strain on the environment around us and and the resources so if you look at the need for more infrastructure if you look at the need for more resources if you look at the impact of all of this stuff on the environment it's it's a substantial thing so if you travel up and on Latin America as we do you can see how the rivers are polluted you can see the forest effect that you can see pollution there's a lot of it and it's deeply concerning that as people become more effluent and consume more that they have a significant effect so we think that there is a significant educational job that has to be fulfilled both by parents and teachers on one hand because you know good practices start at home and it strikes me always when you when you're in the developed world how normal it is for people to have different garbage bins at home to separate their waste something simple is that which you don't find so common as part of the world but on the other hand there's a big job for business to educate and I I actually think that there is it's not just a responsibility but an opportunity because because consumer goods companies that educate the consumer that offer them something which is advantage because of what it does in terms of sustainability in terms of impact on environment is something that has that has opportunity for growth and I think we need to educate on this and I and I think it's important for companies also in this process to educate through the communication of what they do so initiatives like the global reporting initiative which which calls for transparency that calls for for access to information that that that ask companies to calculate the impact on environment I think those things are are really quite important because they have triggered so much so if we look at many consumer goods companies today they are doing serious things in terms of the impact on the environment and we as an example we set ourselves a target some years ago to half the amount of water we use to half the amount of energy we use to half a carbon footprint and we're making significant progress and and the encouraging thing is it's possible and we're not the only ones doing this everybody else is doing it so so as this middle class grows and the strain on infrastructure and resources I think we all have to respond I think education is important but I think the private sector the business community who by and large can play a significant role you know I I think your your points are spot on and and one thing that the audience should know is not just said Miller but South Africa has been real global leaders in the global reporting initiative and Mervyn King is is brilliant that I've worked with him on the International Integrated Reporting Council and I think that the efforts around what he is speaking about are crucial a few themes I think came up through the the various discussions you know trust in business versus trust in government and I'd love to drill down get different perspectives so just kind of free flow this you know I'd love to get into you know little comparison and contrast a few people talked about middle class definitions in Europe versus here I was struck by you know full employment in in Brazil and then you think about you know 25% unemployment in Spain and and countries in the southern part of Europe very much I was struck by the importance of education and entrepreneurship and in how important those might be in sustaining continuing growth in the class those are any topics reactions to these that there's been spurred and yeah or not sure sure I well it's interesting to hear somebody from South Africa talk about this because there is something that's very similar to Latin American other parts of shall we say the northern world uh and it I suppose it applies to a certain degree to Brazil and it applies also to Peru on a smaller scale there's part of us when I go to see South Africa there's part of South Africa which is really Switzerland which is California I mean Switzerland with the bougainvilleas but there is a 70 or 80 percent which really looks like Nigeria so here's the here's the structure I think an American can understand the difference that the the minister from Brazil said if you go back 150 years to the United States and ask what is the middle class your middle class was in the northeast and Billy the kid and all the gold rushers and the guys the Davy Crockets that went to Texas those were the guys that were in that 80 percent trying to rise and the reason that they rose and were incorporated as our minister uh Castilla has just said go beyond traditional macroeconomics you had to empower all those people you had to create democratic government you had to listen to them you had to adapt the law to their needs which you found in the case of the United States by decentralizing by creating property rights for gold mines by creating property rights for cattle ranchers I mean if you actually if you go and see Fort Clint Eastwood films and you see the ranchers shooting up the miners and the miners you've got a picture of Peru in our jungle that's what it's about and what you've got to understand is that those countries that were not able to absorb the middle class like Britain were for the poor were forced to migrate to say South Africa South to India it isn't that they were the great explorers actually we iberics portuguese and spanners did the exploration we opened up the seas what you did is you exported your poor to all these other places because you couldn't create a middle class fast enough and you still see it in places like Britain I mean you go and see the upper classes the cars they have they're huge you go to the horse races these ladies the hats they have they're huge and actually Britain has a smaller middle class today than Germany or France so the reply to all of this is you have to integrate you have to include in the third world that Nigerian part or it's going to migrate internally or it's going to migrate outside this is good we're starting a food fight up here on the panel and so other comments I just think that I don't know it was confusing Australia with South Africa sorry I didn't I missed that he said you you're confusing Australia with South Africa but that's okay please go it I'd like to to add a dimension which I think is absolutely crucial and we highlight in our report you know we are excited about the growth of middle class because people have a better life but we are also excited about the growth of middle class because we believe deep down that the bigger middle class will make for better societies so there's this I think correct perception that the middle class is associated with citizenry that the middle class people are more educated they have better jobs they have a better understanding what the common good is and therefore they can push for better institutions they could reduce the levels of corruption they would monitor governments so that they produce better education etc etc so we did some exercises on this and we we found that this is not that simple when you look at the world as a whole and you do the statistics you do find very good positive associations countries that have larger middle classes have lower corruption they have better institutions better government spending quality more freer markets better property rights so there's this association is what inspires us no but we also found and this is the troublesome part that the latin american middle class does not does not seem to be opting into a better social contract in fact what we found was evidence that the middle class in latin america has the tendency to opt out of the social contract let me give you a couple examples to explain what i mean the moment a latin american household becomes a middle class household the first thing they do is they take their kids out of public schools and put them in private schools they no longer are concerned about the quality of public education as a result you go to the medical republic the moment you're a middle class family you buy your own electricity generator because you don't want to trust public electricity services so once you have your generator you don't care about the quality of the public good of good energy or when you become a middle class in many latin american cities you try to buy a house in gated communities they have walls they have private security because you rather not rely on the public police so you could end up in a bad equilibrium so rather than what you expect which is a middle class that contributes to better institutions more public goods more cohesive society better citizens you may end up with a middle class that opts out and finds private ways of solving their own problems and their interests may diverge from the interest of the public good yeah this is really interesting mr minister i'd love to hear your reaction to some of some of the world bank's views yes yes no and we've been alluded trust in government so i think yeah that too being alluded to uh no i i totally agree with uh with with uh a whistle that this may this progress may lead to you know uh have this perversive effects but this entails actually the government to have adequate policies and what i mean by adequate policies effective service delivery of education of quality quality and health security uh to be able to sustain the middle class predictable rules of the of the game predictability uh because middle classes what they love is stability because they've tasted stability and they don't want this to change and obviously transparency so these are sort of the the challenges besides growth which i mentioned as the first um condition for for um a sustaining a middle class but also let me dwell upon the the the fact that as we have a growing middle class uh the medium voter the citizens don't like pendulum swifts and they start being less tolerant to experiments and they start anchoring uh reforms that sustain you know their own existence which is growth that leads to middle classes emerging so i think uh and this has social implications the pendulum is swifting less in countries for instance in macroeconomic grounds because citizens are happy having low inflation and having jobs that are generated in stable frameworks and environments so i think a way to you know avoid a or a way to boost trust in government is growth but also trying to have a government the government definitely has a role that goes uh beyond you know just uh plane growth and employment generation you need to work these uh uh thanks so to uh make these incentives be in the right place or tell you wanted to add something i would like to also emphasize the whole the role of inequality reduction i'm not talking about redistribution policies necessarily like uh augusto mentioned there is no evidence that the impact of programs like who to as both of familiar was not important for the middle class but for poverty reduction but we live in the most unequal region in the world inequality has been going down for good reasons the label market the at least in brazil you see the bottom part of the label market people working and getting much higher wages and uh growing employment etc so i think um even in the i agree completed that in the long run growth productivity anywhere including here is the key but between here in the long run we have to address inequality i think and we are we have been able to address inequality and i think business that don't look in the bottom part yeah i saw this in brazil we start to release about eight years ago reports on the middle class business didn't realize only four or five years ago that there's a new consumer it's not like the us middle class it's different someone who came from the bottom has very high aspirations but it's not like uh he doesn't want the same things that i want so i think it's uh but i agree completely i would add growth is stability but also goods inequality reduction good i'm saying in the sense that you have the good and the bad cholesterol i'm talking about the good the good one which is keeping incentives going yep but lowering uh you know inequality in uh in a sustainable way so gale gale wants to add something then i want to ask one other question then we're to come to the audience so get prepared for the audience gale yeah i just wanted to add you know what speaking to this sorry i just wanted to add on what you said from the world bank which was so interesting in terms of one of the findings that we had in our in our in our global trust barometer where we measure trust in business angios uh government and media and it's interesting because we look at two audiences we actually divide the findings between the general population and the what we called the informed public so the top 25% wage earners consumers of media um in each country and and and and most education and something that we found this year in the emerging markets was really quite interesting and we really saw it as somewhat of a warning signal to your point and it was that informed publics trust all institutions far more than the general public and i think what you denoted was this sort of skepticism almost that is you know what as they're as the middle class is evolving and growing and reaching new heights there is this healthy or unhealthy skepticism that i think as we all try in our own ways to try and fuel that growth really needs to be kept in mind so so here's my question to the panel and you know this may be provocative it may not be but can we have in latin america a sustainable growing middle class um if we don't have you know more advancement in gender parity if we don't have you know women participating in the workforce uh both the education and the workforce in in enhanced numbers so how important is that to the sustainability of this middle class miracle well i would uh i think the gender uh the gender agenda and all that is it is crucial but i still would go back a little bit to the 19th century in the 19th century whether it's the united states or western europe manufacturing had already started people forget that in the 19th century already 40 percent of europe was manufacturing they were doing machines what brought modernity was how many of the population were allowed to make the machines it's only about in the 1860s and 70s that you can start making a corporation in the united states without an act of congress you need a lot of politics so you empowered your people if the idea was charity henry the eighth started the poor laws and he started saying we owe ourselves to the poor and we have to start to give them enough money so that they don't live leave the hinterland and come to london but oliver twist kept coming to london so the reply to that is instead of gender you have to empower them and in places like peru like latin america the majority of people do not have property not the way you understand the states and cannot form companies not the way you do it so that way the reply is you do not get a middle class and by the way the reason i'm asking about genders there's a gender parity session that starts at 1215 other comments on this yes go ahead i think gender is key and what i think in latin america what we have been doing as government policies to empower not only not so much women but the mothers i think that what we found through these programs that give power to the mothers it's really a revolution going on in the bottom part not so much in the in the middle class but i don't see i think you know the future is of is of the women you know they are more educated than men i mean they you know in the labor market they get lower wages than they should but that's a matter of time i don't see you know in my country you know my boss is a woman she you know she does you know i mean she does a very good job i mean i think the future is the women i wouldn't be i'm more i'm more worried about other groups i think you know we are very matriarchat thank you carl and the minister and then we'll go to the audience for what we what we observe in the communities out there is that the women bear the brunt of the social problems and pick up pick up the responsibility the majority of our customers are actually women trying to survive taking care of their family and investment there makes a huge difference to the quality of the life of an entire family and with it an entire community and and so that focus on women on the emancipation in their roles in the society in their families that is i think a key area of of investment to come for us mr minister very very quickly i'm going to quote my boss that is a man and he says that when you take a woman out of poverty you take a family out of poverty and and it's real it's true and talking about inclusive growth definitely because in our country we've grown they say that we are a star etc but people a lot of people don't perceive that and and so there's this gap between you know what what it seems to be a thriving economy and the perceptions of a lot of Peruvians in a country that is growing fast fastly the investment is coming in but there's this perception that all the benefits are not going to the pockets of regular people very important okay who's got question the auditor microphones we have microphone coming right okay right here to the front thank you for this very interesting panel my name is felix maradiaga from from nicaragua there is a general perception that the middle class in lat america does not have the same levels of influence and political participation of compared middle classes for example in europe and the us precisely because a sort of monopoly of the traditional elites in decision-making so likes to ask the panel what kind of policies from your observations are more effective in in creating incentives for effective political participation of the middle class in america okay who wants to tackle that go ahead you know when when you think about policies that are appropriate for the middle class i cannot think of one that's most important than uh creating equality of opportunities this picks up on what minister nary was saying inequality is very high in latin america and we have been successful in seeing some reduction in inequality and that has helped the perceptions and the aspirations of people but in the end what will matter is whether the children can do better than the parents independently whether they were born in a rich family or in a poor family this is what the economy is called mobility across generations in our study we found that in interesting paradox while the middle class has grown in latin america within generations this mobility across generations is still very low in latin america if you are unlucky and you're born in a poor family your outcomes are likely going to be bad so the ability of little kids to gain independence from the family background is very low in latin america compared to say southeast asian countries so whatever we can do in policy that enhances the equality of opportunity for the poor for women for everybody so that they know that their future is not chained to the background of the family where they were born and through merit and effort they can forge their own future that i think is crucial for the sustainability of the middle class for the involvement of the middle class in political participation for the involvement in the middle class in the improvement of institutions that i think is a big agenda august how i think that's right i think one of the things my observation in in sort of breaking that generational barrier is really supporting entrepreneurship and innovation when when you're able to form companies and and entrepreneurs can start things that's how to get out okay who's next back here about three rows back and then raise your hands and we'll get a microphone to the next person quickly so go ahead uh hi my name is lisa we're new uh one of the young global leaders peruvian bed living in silicon valley and working in technology for the last decade one question i had and i kind of placed around some of the things that were mentioned about income and middle class at the end of the day money and income is just a tool to get access to services goods and i'd like to hear from the audience specifically the you know people from the business community and and the edelman lady on how does business can really target their products to a growing middle class beyond you know the marketing and the product development but how to build sustainable consuming class because at the end of the day the consumer i mean a lot of peruvians keep looking themselves as you know in the export business when a country turns itself into like a sustaining middle class it really it's because they build an internal consumer business and a consumer uh culture which in a way sustains other businesses what i don't know what saying there's like very few people in the u.s that actually produce a lot of them are working for the producers and sort of like services whether they're professional services doctors accountants restaurants and so forth yeah carl you'll take it i'm quite happy to answer that question because i because i think there is there's something important here and that is and that is the the way in which a corporation a business roots itself in a community makes all the difference to that community so if for instance you're bringing new technology and new practices etc and you're you develop human capital in the process of bringing that day you make a difference to that community if you're developing your local supply chain if you localize it involve other people and on inclusive and your value chain you're helping to reach many other people i mean this given example from our business for every job that we create in our business there's 40 jobs created in the entire value chain so the multiplier effect is quite substantial so the training that comes with that the inclusion of the value chain the way you deal with with people and then importantly the corporate social responsibility program and also the the corporate social investment program that you have with it makes a big difference so we have invested for these very reasons quite substantially in entrepreneurship development and we have several programs running across the continent which have had an enormous effect in the creation of business and we've walked that path with people as they've gone from survival and seed capital to setting up a business to growing and needing more financing and putting them in touch with angel investors and supporting them through that journey the way you commit to those things and the way you sustain that makes all the difference so we can quite you many examples of how you could do that better but i think that's a big role for business and gail you wanted to add yeah it's a it's a it's a great question and one that marketers all over the world struggle with every day particularly in a world where there are global brands but in essence there aren't global brands because the same messages that you need to deliver to the audience in the us in europe is actually quite different than the messages that you need to do here so i would break it up into into into two parts i think one there are actually you know a list of probably 10 key things that you can do when marketing to the middle class in latin america or other emerging markets you can make the brand aspirational because there's a lot of aspirate you know buying detergent it means a lot more than just buying detergent it means sort of more freedom from actually doing the laundry in the way that that it has been done you can change your business model you can actually make products distribute products let people try products for free that's very necessary as part of the engagement here that may not be in other non-emerging markets heavy mobile very important because that's because that is the society so those are things some just examples of things that you can do but the way in which you do them in many instances can actually be more important um social media so of the online population latin america is the most active participant in social media more than anyone in the world brazil for the 65 million users on facebook making face making brazil the second biggest country for facebook right after um the us and i think what's so interesting when i work for companies in the based in the us and based here here there is tremendous opportunity for business to leverage social media for their own brands that really just is now sort of starting not in the same way that it has been uh done and has evolved in the us per se there is tremendous opportunity and there's a number of businesses right now that are just exploring this and and really could be on the brink of something exciting brilliant let's see who else over here my name is robert teixeira da corta from brazil i was the first president of securities exchange commission i was a member of isb as a trustee many years ago my question is the following since our region one of the main problem is the scarcity of savings and consequently of investments how this middle class should be educated and not only to consume but also to invest yes okay now first thing um i think we tend to think the middle class more in terms of consumers and i think the what is behind it you know uh as i said women are having less kids these kids are going to school after school they're getting a formal job so there is a sustainable part that we tend to overlook and look them especially companies because you're looking at your own business as um as only as consumers i think there is what we call is the title of our book the bright side of the poor you know they're really going after they want to to go up but i think in terms of savings i think uh i'm very negative about uh savings in latin america and brazil in particular we are low savers we save one fourth of what china saves in terms of family but i don't see any change because you know demographics people getting older the old save less you having falling inequality the poor save less uh you having lower interest rates uh which is incentive you having lower uncertainty like the minister said so i think all the trends are towards low savings and finally people are still very optimistic with respect to their future so they don't want to save but people do have you know they invest in education they invest in technical course so if we enlarge we are talking about financial savings but if you enlarge the concept and including productive assets then perhaps you have a less a less pessimistic picture but in my opinion that's a key challenge to increase household savings we should have a campaign for that if i may add quickly to this um for this it's crucial to develop a culture um and education is is paramount to that uh you need to have a uh a culture to save a culture to uh to have a foresee your future um to save for um old age and i agree i mean this is isn't ingrained in our societies uh if you have money in your pocket uh you spend it and this is something that needs to be tackled through more education more financial education to get more savings and to no make this sustainable with that we are about to get the hook because we're running out of time there've been a lot of different topics and i'm going to ask just very quick closing comments of things that we need to focus on my sense is from listening to this that there is a lot of opportunity but that it's critically important that this golden triangle of the corporate community the governmental sector and civil society work together to address the multiplicity of issues that have been discussed kind of just going gail i'm gonna start with you and go this way you know top priorities closing thoughts anything you have to say very quickly um i would say uh that i think the uh the opportunity for business uh today in terms of reaching this middle class in latin america and um in other emerging markets is tremendous um and um when i think about the kinds of things that people in this market are responding to in terms of business in terms of wanting um wanting more information and wanting more um integrity and leadership in terms of societal issues i think it's a tremendous opportunity both for the region itself and also for the business community excellent anando briefly savings is important but if you look now at the recession for example that you have in the united states your savings are all right but your private credit has completely dried up so savings isn't only a question of thrift it's also whether you believe in the paper that you're going to save in so when all your derivatives have lost trust your government has come to has got to come in and it's had to really put a lot of money inside so it's not only about savings is one what are the other two real quickly okay the other two are you need we were talking about participation yep you need not only to participate in elections in the united states you have commented notice periods you've got referendums not uh not a consultation referendums you actually enact local laws even indigenous community we have none of that in latin america we think of democracy only as elections not participation and last but not least we sign free trade agreements with you giving you all sorts of rights that we don't have inside our country ourselves so it's a question of also looking inwards to have internal free trade agreements wonderful augusto yeah the sustainability of the middle class is closely tied to the ability of the middle class in society of building assets there's no better an asset to build than human capital i think at the core of the development of the middle class is that is that is the education system the acquisition of skills and the quality of the human capital or the labor force together with that you have to have saving instruments which you don't don't have as the middle class grows one typical asset the middle class invests in its houses that requires a housing market and a in a financial market that supports that education saving opportunities thank you car there's one thought and that is that i i think in order to sustain the momentum we have in the growth of middle class now we need to sustain investment that's going to be harder to do but the role of technology and investment has been to help us catch up in latin america there's a huge deficit in terms of infrastructure in terms of the manufacturing capabilities in terms of in terms of technical capabilities and i think that we need to get clever at making sure that investment is sustained i think that's right and i would add drink more beer and marcello okay as it comes this way you know i have less options so i would say that in the last years in latin america we we gave them the poor to the markets this was rather important in terms of keeping the wheels of the economy going you know grow stability and redistribution now what we need is give the markets to the poor you know better markets know better regulation so they have when they have access to public service in the private markets no health health insurance uh complimentary savings pension funds private schools and you know these are better because what i see in brazil is that consumer protection is a key issue now firms are getting bigger and we so we need to protect this consumer with better regulation and the last word to the minister i totally agree with everyone so basically uh but consumer protection but without being protectionist which is different and uh growth and for that you need the government to enable growth and if it's of good quality even better many thanks let's give this great panel a big round of applause