A Mexican Middle Class Revival?

Fragile, to be sure, but its there.

Most economists agree that, for any country, sustained economic growth is dependent on an expanding urban middle class. In Mexico the middle classes have been slow to recover from the massive crash of 1982 and the "lost decade" that culminated in the “Tequila Meltdown” of 1994. So, news of a Mexican middle class revival from a number of sources is welcome news indeed.

The Economist points to four key sectors as evidence of an expansion in the Mexican lower middle class: the growth in low cost home construction and mortgages; expanding consumer credit - the Mexican Bank Association recently announced that 3 million new credit cards will be distributed to lower middle class consumers; first time use of air travel – a survey by a new low-cost Mexican airline found that 47% of its passengers had never flown before and record levels of new car sales for affordable sub compacts.

According to Alejandro Hope of GEA, a consultancy in Mexico City, the number of lower middle class families (lower C and D+) has increased 88% in the ten years from 1996 to 2006, from 5.7 million to 10.7 million.

Data from AC Nielsen (a leading market research company) also points to growth at the upper end of the middle class, the C+ and middle C groups which has increased from 29% of the population in 2000 to 32% in 2006.

As one might suspect, these trends are far from being uniform across the country. According to AMAI (the association of Mexican Market Research Agencies) 2004 data, the middle C class represents 22% of the population in Monterrey, 21% in Guadalajara, falling to 15% in Mexico City and 12% in the south of the country.

What is interesting, are the ways in which middle class values and aspirations are changing. The new middle class is seen to be better educated, more self-sufficient and ambitious than the middle classes of 20 years ago. Aspiration, status and upward mobility are still the key drivers of middle class habits and attitudes, but now reinforced with a more self-reliant northern work ethic.

Explaining the middle class revival is probably best left to the experts, but one factor probably heads the list: in the absence of sustained employment growth, one could surmise that remittances from migrant workers in the US (projected at $12 billion dollars for 2007) alone are now sufficient to lift millions of families into the lower middle class.

It is doubtful whether these early indications of a middle class recovery will be sufficient, in the short term, to impact the myriad socio-political issues facing the country, but their impact on consumption patterns and therefore marketing thinking and business strategy is already apparent and the need for regional strategies will become more and more important as the middle class revival gathers momentum.