A Middle-Class Wave in Mexico

This Latin American nation is poised for explosive growth in the years ahead – and it can thank a tech-savvy middle class.

In case you missed it, check out the first two articles in our Mexico series – The Fast Lane to Economic Opportunity and U.S. Manufacturers Find the Right Shore in Mexico.

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A country without a vibrant middle class is a country without a future.

A country without a vibrant middle class is a country without a future.

To grow this critically important demographic, any modern nation must provide its citizens with access to a world-class education, technology, and ultimately, a job. By that metric, there’s good reason to be bullish about Mexico.

Contrary to common myths, Mexico’s middle class is on the rise, laying the foundation for even more prosperous times.

According to the market research firm, Euromonitor International, the Mexican middle class accounts for 47 percent of all households in the Latin American nation. Euromonitor estimates that by 2030, more than 18 million households will be considered middle class, a figure equivalent to all the households in Spain.

But we’re already seeing such a transformation at work. This middle-class progression will disrupt a number of industries, particularly as many of the world’s most successful manufacturers set their sights on Mexico.

But that’s just one part of the equation. Taking Mexico from developing to developed nation will require much work. Businesses of all stripes must better understand the Mexican middle class and how they can tap into this group. In many cases, the Mexican consumer is every bit as important as the supplier.

Mexico’s technology industry is still evolving, and the country is growing a future generation of tech-savvy professionals. It now has three times more engineering graduates per capita on a yearly basis than the United States.

In this globalized economy, it’s hard to imagine a currency more valuable than a talent edge – and Mexico will take advantage of it.

[Also on Longitudes: Industry 4.0: Smart Factories Need Smart Supply Chains]

The babysitter with an iPad

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Middle-market companies are selling less-expensive versions of tech products in Mexico.

Cellphones. iPads. Laptops.

These are just a few of the items you’d see in households throughout Mexico. Middle-market companies are increasingly selling less-expensive versions of tech products to a domestic audience in Mexico, putting the latest gadgets in homes faster than ever before.

That’s why a babysitter, for example, can purchase an iPad for less than the equivalent of $50 U.S.

The telecommunications industry is also getting bigger and bigger in Mexico.

The GSMA, the international association of mobile service providers, estimates that smartphones will grow from 32 percent of all phone connections in Latin America in 2014 to 68 percent of all phone connections in the region in 2020.  This would equal more than 605 million smartphones in the region by the year 2020 — a figure that will be exceeded only by the Asia Pacific region.

In another report, PricewaterhouseCoopers put it this way:

The telecom sector has been experiencing a growth spurt that just won’t stop. A combination of trends — economic growth, consumer demand and further regulatory changes — is moving countries across Latin America to continue investing and innovating to meet the communications needs of consumers and businesses. In most of the countries, mobile and broadband offer major opportunities and are attracting competition not only from local operators, but also from abroad.

Additionally, by 2020, the GSMA estimates that nearly half of the population will use their cellular devices to access the mobile Internet. We’re seeing similar developments in Mexico, Brazil, Argentina, Colombia and Venezuela.

For context, roughly 50 percent of Mexican Internet users are concentrated in Mexico City, Guadalajara and Monterey. And Mexico’s new technology hubs are in three primary cities: Guadalajara, Juarez City and Tijuana.

[Click here to learn how UPS can help U.S. exporters capture new opportunities in Mexico — and Mexican exporters to increase trade with the U.S.]

If you build it…

Mexico’s technological infrastructure is improving, but there’s room for growth in the e-commerce ecosystem.

Though 85 percent of Mexican users have access to social media, just 25 percent use the Internet to make purchases, according to a survey by the Mexican Internet Association. This is largely because of a lack of credit cards and a lingering hesitance to shop online.

According to the UPS Pulse of the Online Shopper Mexico study, just 40 percent of respondents said they preferred to make purchases online.

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An opportunity gap is far too prevalent in Mexico – it must be snuffed out.

Some may see this as a problem, but really, it’s a massive opportunity for retailers and logistics companies alike. At UPS, we know that getting customers what they want when they want it is a time-tested recipe for success.

We’re already seeing this in urban hotspots such as Mexico City and Guadalajara. We expect similar developments in other pockets of the country in coming years.

This is not to suggest that poverty has been eradicated. An opportunity gap is far too prevalent in Mexico – it must be snuffed out.

But Mexico is not the land of low-skilled factory work that some would suggest. In Mexico, sophisticated titans of industry are finding solutions to their most vexing supply chain problems. Universities are producing waves of engineers and other highly skilled professionals in high demand today.

This is good for both the production and consumption of high-tech goods. Companies can rely on Mexican workers to produce their complex goods – and in turn, this rising middle class, which possesses more disposable income, will become a valuable customer base.

This is not a pipe dream. Mexico is swiftly becoming a majority middle class country. The rest of the world should plan accordingly. goldbrown2


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Iliana Castro is Segment Manager for the Technology Industry at UPS Mexico.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.