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Urbanization in Latin America July 2017 Urbanization in Latin America Urbanization in Latin America July 2017 Urbanization in Latin America Urbanization in Latin America: main messages 1. Urbanization 2. Urbanization and 3. Urbanization and trends income digitization Urbanization levels have Urbanization is positively Urbanization is also positively increased significantly in Latin correlated with income per capita, associated with digitization. America since 1950. as well as with capital, labor and productivity (TFP) measures. Latin America countries should try Urbanization is now around 80% to leverage on their high in Latin American countries, more However, in spite of displaying urbanization levels to boost than in most of the other regions. high urbanization rates, Latin digitization. American countries show relatively After a sharp growth, urbanization low levels of income, capital, labor in Latin America exhibits signs of and productivity. moderation. Over the next decades it will expand below the Prospects of milder expansion of world average. urbanization ahead represent a challenge in terms of growth for the region. 2 Urbanization in Latin America 1. Urbanization trends Urbanization in Latin America Urbanization took place earlier and at faster pace than in other emerging markets in Latam and is now at advanced economies’ levels Share of urban population by regions (1950, 2015 and 2050)* (% of total population) 0 10 20 30 40 50 60 70 80 90 100 Latin America & Caribbean Asia Africa Developing world Eastern Europe Australia/New Zealand North America Western Europe Developed world Japan and South Korea World 1950 World 2015 World 2050 1950 2014 2050 (f) 80% of Latin America 13% of world’s 93% growth of Urbanization to population living urban population urbanization rate reach 86% by & Caribbean in urban areas since 1950 2050 Source: BBVA Research and UN. * Share of population residing in urban areas for each year. Urbanization in Latin America Urbanization in Latam to expand less than the world average in the future, which represents a challenge in terms of growth for the region Urbanization rates Urbanization growth (% of total population) (average rate of urbanization growth, %) 95 ARG 1.4 URU CHL PER 1.2 85 COL BRA 1 World 75 VEN 1950-2015 PAR 65 WLD 0.8 MEX World 55 0.6 2015-2050 45 0.4 35 0.2 25 0 1975 1950 1955 1960 1965 1970 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Argentina Brazil Chile Colombia Mexico Paraguay Peru Uruguay Venezuela Average urbanization growth 1950-2015 World Average urbanization growth 2015-2050 Source: BBVA Research and UN Urbanization in Latin America Urbanization levels vary significantly within each country in Latam Regional urbanization within Latin American countries * (maximum, minimum and average urbanization at state level for each country) 100 90 80 70 60 50 40 30 20 10 0 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 2000-2010 1950-1970 Argentina Brazil Chile Colombia Mexico Paraguay Peru Uruguay Venezuela Maximum Minimum Simple average Source: BBVA Research and national statistics. * Only one specific year has been considered for each period (ARG: 1960 and 2010; BRA: 1960 and 2001; CHL: 1960 and 2015; COL: 1970 and 2002; MEX: 1960 and 2000; PAR: 1962 and 2002; PER: 1960 and 2007; URU: 1963 and 2004 and VEN: 1961 and 2001) varying according to the availability of national demographic statistics. Urbanization in Latin America Practically half of the total urban population in Latam lives in (few) big cities, a larger share than in other regions Share of urban population in big cities Number of big cities across Latam* (% of total urban population; 2015) (2014) 60 22 20 50 18 40 16 30 14 12 20 10 10 8 0 6 4 2 0 ARG BRA CHL COL MEX PAR PER URU VEN % of urban population in cities from 1 to 5 million Number of cities with population from 1 to 5 million % of urban population in cities from 5 to 10 million Number of cities with population from 5 to 10 million % of urban population in cities with 10 million or more Number of cities with population equal to 10 million or more Source: BBVA Research and United Nations. * The number of cities with a population of at least 1million is equal to 105 in China, 8 in Turkey, 58 in India, 11 in Indonesia, 6 in South Africa, 13 in the Russian Federation and 1 in Poland. Urbanization in Latin America 2. Income and urbanization Urbanization in Latin America Income and urbanization are highly correlated; Latam countries have relatively high urbanization given their income levels GDP per capita and urbanization * (1975 ,1995 and 2014) 12 12 12 R² = 0.4703 11 11 11 R² = 0.5664 R² = 0.6984 10 10 10 CHL URU 1975 1995 2014 ARG MEX BRA ARG MEX CHL ARG COL URU MEX BRA PER BRA 9 PER URU 9 COL 9 capita capita in PAR COL CHL PAR PER per per PAR 8 8 8 GDP GDP capita per in GDP capita per in (logarithm real GDP of in USD) (logarithm real GDP of in USD) (logarithm real GDPof in USD) 7 7 7 6 6 6 0 20 40 60 80 100 0 20 40 60 80 100 0 20 40 60 80 100 Share of urban population in 1975 Share of urban population in 1995 Share of urban population in 2014 Source: BBVA Research, World Bank and World Penn Tables. * For information at regional level within each Latam country see the Annex. Urbanization in Latin America Countries with higher urbanization levels exhibit greater levels of capital and better infrastructure; all Latam countries underperform Capital per worker and urbanization Global Quality of infrastructure (2014) (2015, scale ranges from 1 (worst) to 7 (best)) 14 7 R² = 0.2501 R² = 0.4964 13 6 7 (best) - 12 CHL 5 MEX URU 11 CHL BRA ARG COL MEX 10 PAR PER 4 URU PER ARG 9 COL 3 Log Capital Log Capital workerper PAR 8 BRA 2 7 Quality Quality of overall infrastructure, 1 6 1 0 20 40 60 80 100 0 20 40 60 80 100 Urban population (% of total) Urban population (% of total) Source: BBVA Research, World Bank, Penn World Table and World Economic Forum Urbanization in Latin America In spite of exhibiting high urbanization rates, human capital levels are relatively low in Latam Employment-to-population ratio and urbanization Human capital index and urbanization* (2014) (2014) 0.8 4.0 R² = 0.4079 0.7 3.5 R² = 0.1707 CHL 0.6 3.0 ARG COL BRA PER MEX BRA URU PAR 0.5 URU 2.5 COL PAR PER CHL population population ratio - 0.4 MEX 2.0 to ARG - 0.3 1.5 Human capital index 0.2 1.0 Employment 0.1 0.5 0.0 0.0 20 40 60 80 100 20 40 60 80 100 Urban population (% of total) Urban population (% of total) Source: BBVA Research, World Bank and Penn World Table. * Human capital index based on years of schooling and returns to education; see PWT9 for more information. Urbanization in Latin America Productivity is larger in more urban countries, but comparatively small in Latam Total factor productivity and urbanization* (2014) 2.0 1.8 1.6 1.4 1.2 R² = 0.4159 1.0 0.8 ARG CHL URU 0.6 PER MEX COL PAR BRA Total Factor Productivity Total Factor Productivity (TFP) 0.4 0.2 0.0 0 10 20 30 40 50 60 70 80 90 100 Urban population (% of total) Source: BBVA Research, World Bank and Penn World Table. * Total factor productivity at current PPPs (USA=1) Urbanization in Latin America 3. Digitization and urbanization Urbanization in Latin America Urbanization entails greater opportunity for digitization; in particular in Latam where technology adoption lags behind BBVA Research Digitization Index and urbanization* Technology adoption and urbanization (2015, scale ranges from 0 (worst) to 1 (best)) (2015, scale ranges from 1 (worst) to 7 (best)) 1.0 6.5 R² = 0.4042 R² = 0.3037 0.9 6.0 0.8 CHL 5.5 0.7 5.0 MEX URU 0.6 PER CHL 4.5 COL BRA 0.5 URU COL 4.0 ARG 0.4 MEX PAR ARG 3.5 0.3 PER Technological Technological adoption BRA 3.0 0.2 BBVA BBVA Research Digitalization Index PAR 0.1 2.5 0.0 2.0 0 20 40 60 80 100 20 40 60 80 100 Urban population (% of total) Urban population (% of total) Source: BBVA Research, We forum and World Bank. *The index contains 21 indicators that are divided in 6 dimensions or sub indices Urbanization in Latin America Urbanization correlates positively with each dimension of the BBVA Digitization Index; Latam underperforms in most of them Performance in the different dimensions of the BBVA Research Digitalization index and urbanization (2015, scale range from 0-worst- to 1-best ) 1 1 0.6 0.9 CHL 0.9 URU 0.5 B2B, B2B, 0.8 0.8 COL 0.7 0.7 CHL Internet Internet 0.4 MEX BRA 0.6 0.6 COL BRA 0.5 PER ARG 0.5 0.3 BRA level technologylevel PER MEX 0.4 - 0.4 URU COL CHL ARG coverage 0.2 PER URU Broadband Internet 0.3 0.3 PAR ARG 0.2 0.2 MEX PAR 0.1 PAR 0.1 0.1 Infrastructure: R² = 0.3371 R² = 0.2302 R² = 0.2866 0 Enterprise adoption: 0 0 Content: B2C and firm tariffsand internet competition 20 40 60 80 100 20 40 60 80 100 40 60 80 100 Urban population (% of total) Urban population (% of total) Urban population (% of total) 1 1 0.9 0.9 0.8 0.8 R² = 0.264 laws access 0.7 0.7 URU ICT 0.6 0.6 BRA ARG CHL 0.5 0.5 URU CHL MEX 0.4 COL MEX 0.4 BRA subscriptions 0.3 0.3 PAR PER 0.2 COL internet internet and mobile 0.2 PER Regulation: 0.1 Users Users adoption: 0.1 R² = 0.534 PAR ARG 0 0 20 40 60 80 100 20 40 60 80 100 Urban population (% of total) Urban population (% of total) Source: BBVA Research and World Bank.
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