Wealth lag

Latin America lags behind as global wealth continues to rise.

Despite the COVID-19 pandemic and the associated economic difficulties, the Credit Suisse  2021 Global Wealth report revealed a 7.4% increase in global wealth. Moreover, wealth per adult rose by 6% reaching a record high of USD 79,952.

Unsurprisingly, a managing director and a multinational wealth manager was in a good mood, “There are many factors driving growth in wealth in the developed world, the most significant being the willingness of central banks to flood the market with cheap money. Many of our clients have borrowed more to invest in all kinds of things and are reaping the returns.”

“There are many factors driving growth in wealth in the developed world, the most significant being the willingness of central banks to flood the market with cheap money.”

Managing director, multinational wealth manager

Such fortunes were not shared by Latin America, the worst performing region, which registered a reduction in wealth of 11.4%, amounting to USD 1.2 trillion. These losses were aggravated by the depreciation of fixed exchange rates which also limited Latin America’s capacity to increase its debt for social spending and limit the impact of COVID-19.

The managing director continued, “It’s a different story in Latin America and Africa. Central banks there have either chosen not to stimulate the economy with cheap money or are not in a fiscal position to do so. This has made it harder for our clients in these regions to increase their leverage to boost returns.”

“It’s a different story in Latin America and Africa. Central banks there have either chosen not to stimulate the economy with cheap money or are not in a fiscal position to do so.”

Managing director, multinational wealth manager

The majority of the wealthiest individuals in Latin America continue to reside in Brazil and Mexico, measured by the number of High Net Worth Individuals (“HNWIs”) and the number of Ultra Net Worth Individuals (UHNWIs), considered those with USD 30 million or more). Chile, Peru and Argentina complete the top five countries with the most UHNWIs in the region.

A February 2021 report by Knight Frank, a global real estate group, predicted that the number of UHNWIs will grow by 27% in the next five years taking the total global population of UHNWIs to 663,000 by 2025. Once again, Latin America is lagging behind this trend which will be spearheaded by Asian countries such as China, with a 246% increase in the number of UHNWIs.

An economic development official in Colombia postulated the cause of this, “The growth in UHNWIs in countries like China has been driven in part by the growth of technology companies and entrepreneurs. Latin America has comparatively fewer such companies and most economies are still based on old industries such as energy and mining, which are frequently owned or controlled by the state.”

Although the global wealth growth figures provided by the Credit Suisse Global Wealth report slightly differ from those of Knight Frank, the trend remains similar. Global Wealth is projected to rise by 39% over the next five years, reaching USD 583 trillion by 2025, according to Credit Suisse estimates, but Latin America will continue to lag behind.

 

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