Urbanization in Latin America - Microsoft · Urbanization in Latin America 1. Urbanization trends...

Urbanization in

Latin America July 2017

Urbanization in Latin America

1. Urbanization trends

Urbanization in Latin America: main messages

2

2. Urbanization and income

3. Urbanization and digitization

Urbanization levels have

increased significantly in Latin

America since 1950.

Urbanization is now around 80%

in Latin American countries, more

than in most of the other regions.

After a sharp growth, urbanization

in Latin America exhibits signs of

moderation. Over the next

decades it will expand below the

world average.

Urbanization is positively

correlated with income per capita,

as well as with capital, labor and

productivity (TFP) measures.

However, in spite of displaying

high urbanization rates, Latin

American countries show relatively

low levels of income, capital, labor

and productivity.

Prospects of milder expansion of

urbanization ahead represent a

challenge in terms of growth for

the region.

Urbanization is also positively

associated with digitization.

Latin America countries should try

to leverage on their high

urbanization levels to boost

digitization.


1. Urbanization

trends


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)

Source: BBVA Research and UN. * Share of population residing in

urban areas for each year.

13% of world’s

urban population

80% of

population living

in urban areas

93% growth of

urbanization rate

since 1950

Urbanization to

reach 86% by

2050

Latin America & Caribbean

0 10 20 30 40 50 60 70 80 90 100

Latin America & Caribbean

Asia

Africa

Eastern Europe

Australia/New Zealand

North America

Western Europe

Japan and South Korea

De

ve

lop

ing w

orld

De

ve

lop

ed w

orld

1950 2014 2050 (f)

World 1950 World 2015 World 2050


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 (% of total population)

Source: BBVA Research and UN

Urbanization growth (average rate of urbanization growth, %)

25

35

45

55

65

75

85

95

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

Argentina Brazil Chile

Colombia Mexico Paraguay

Peru Uruguay Venezuela

World

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Average urbanization growth 1950-2015

Average urbanization growth 2015-2050

World

1950-2015

World

2015-2050

WLD

PAR

COL PER

BRA

VEN

CHL ARG

URU

MEX


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)

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.

0

10

20

30

40

50

60

70

80

90

100

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

19

50-1

970

20

00-2

010

Argentina Brazil Chile Colombia Mexico Paraguay Peru Uruguay Venezuela

Maximum Minimum Simple average


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.

Number of big cities across Latam* (2014)

Share of urban population in big cities (% of total urban population; 2015)

Practically half of the total urban population in Latam lives in (few) big

cities, a larger share than in other regions

0

10

20

30

40

50

60

% of urban population in cities from 1 to 5 million

% of urban population in cities from 5 to 10 million

% of urban population in cities with 10 million or more

0

2

4

6

8

10

12

14

16

18

20

22

ARG BRA CHL COL MEX PAR PER URU VEN

Number of cities with population from 1 to 5 million

Number of cities with population from 5 to 10 million

Number of cities with population equal to 10 million or more


2. Income and

urbanization


Income and urbanization are highly correlated; Latam countries have

relatively high urbanization given their income levels

Source: BBVA Research, World Bank and World Penn Tables.

* For information at regional level within each Latam country see

the Annex.

GDP per capita and urbanization * (1975 ,1995 and 2014)

ARG BRA

CHL

COL MEX

PAR

PER

URU

R² = 0.4703

6

7

8

9

10

11

12

0 20 40 60 80 100

GD

P p

er

capita in 2

014

(logarith

m o

f re

al G

DP

in U

SD

)

Share of urban population in 2014

ARG

BRA

CHL

COL

MEX

PAR PER

URU

R² = 0.5664

6

7

8

9

10

11

12

0 20 40 60 80 100

GD

P p

er

capita in 1

995

(logarith

m o

f re

al G

DP

in U

SD

)


ARG

BRA

CHL COL

MEX

PAR

PER URU

R² = 0.6984

6

7

8

9

10

11

12

0 20 40 60 80 100

GD

P p

er

capita in 1

975

(logarith

m o

f re

al G

DP

in U

SD

)



Countries with higher urbanization levels exhibit greater levels of

capital and better infrastructure; all Latam countries underperform

Source: BBVA Research, World Bank, Penn World Table and World

Economic Forum

Capital per worker and urbanization (2014)

Global Quality of infrastructure (2015, scale ranges from 1 (worst) to 7 (best))

BRA

ARG

CHL

COL

MEX

PAR

PER

URU

R² = 0.2501

1

2

3

4

5

6

7

0 20 40 60 80 100

Qualit

y of

overa

ll in

frastr

uctu

re, 1

-7 (

best)

Urban population (% of total)

ARG BRA

CHL

COL

MEX

PER PAR

URU

R² = 0.4964

6

7

8

9

10

11

12

13

14

0 20 40 60 80 100

Log C

apital per

work

er



In spite of exhibiting high urbanization rates, human capital levels are

relatively low in Latam

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.

Employment-to-population ratio and urbanization (2014)

Human capital index and urbanization* (2014)

ARG

BRA

CHL

COL

MEX

PER PAR URU

R² = 0.1707

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

20 40 60 80 100

Em

plo

yment-

to-p

opula

tio

n r

atio


ARG BRA

CHL

COL MEX

PER

PAR URU

R² = 0.4079

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20 40 60 80 100

Hum

an c

apital in

dex



Productivity is larger in more urban countries, but comparatively

small in Latam

Source: BBVA Research, World Bank and Penn World Table.

* Total factor productivity at current PPPs (USA=1)

Total factor productivity and urbanization* (2014)

ARG

BRA

CHL

COL MEX PER

PAR

URU

R² = 0.4159

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0 10 20 30 40 50 60 70 80 90 100

Tota

l F

acto

r P

roductivity (

TF

P)



3. Digitization and

urbanization


Urbanization entails greater opportunity for digitization; in particular in

Latam where technology adoption lags behind

BBVA Research Digitization Index and urbanization* (2015, scale ranges from 0 (worst) to 1 (best))

Source: BBVA Research, We forum and World Bank. *The index

contains 21 indicators that are divided in 6 dimensions or sub

indices

CHL

URU

BRA

COL MEX

ARG PER

PAR

R² = 0.4042

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0 20 40 60 80 100

BB

VA

Researc

h D

igitaliz

atio

n I

ndex


Technology adoption and urbanization (2015, scale ranges from 1 (worst) to 7 (best))

PAR ARG

URU

CHL

MEX

COL PER

BRA

R² = 0.3037

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

20 40 60 80 100

Technolo

gic

al adoption



Urbanization correlates positively with each dimension of the BBVA

Digitization Index; Latam underperforms in most of them

CHL URU

BRA

COL

MEX

ARG PER

PAR

R² = 0.3371 0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

20 40 60 80 100

Co

nte

nt:

Bro

adba

nd I

nte

rnet

tari

ffs a

nd inte

rnet

com

petition


CHL

URU

BRA COL

MEX

ARG

PER

PAR

R² = 0.2302 0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

20 40 60 80 100

En

terp

ris

e a

do

pti

on

: B

2B

, B

2C

and f

irm

-level te

chnolo

gy


Performance in the different dimensions of the BBVA Research Digitalization index and urbanization (2015, scale range from 0-worst- to 1-best )

CHL URU

BRA COL

MEX ARG PER

PAR

R² = 0.2866 0

0.1

0.2

0.3

0.4

0.5

0.6

40 60 80 100

Infr

astr

uc

ture

: In

tern

et

covera

ge


CHL URU

BRA

COL

MEX

ARG

PER

PAR

R² = 0.264

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

20 40 60 80 100

Reg

ula

tio

n:

ICT

law

s


ARG URU

BRA

COL MEX

CHL

PER PAR

R² = 0.534 0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

20 40 60 80 100

Users

ad

op

tio

n:

access

inte

rnet

and m

obile

subscriptions

Urban population (% of total) Source: BBVA Research and World Bank.


Urbanization plays an important role at explaining demand for

digital products and services, according to our models

Main drivers of digital banking (From more important (1) to less important (0); based on the results of BBVA Research digital banking model)

Oth

er

va

ria

ble

s

Urb

an

iza

tio

n

Inco

me

0.0 0.2 0.4 0.6 0.8 1.0

Affluent (High income population)

High/Medium middle classes

Low middle classes

Other GDP effects

Density of rural areas

Urban population in small cities

Urban population in big cities

Density of Urban areas

Urban population in medium cities

Regulatory Quality

Tertiary Education

Population Median Age

Household Size

Credit

Gini

Inco

me

Va

ria

ble

sU

rba

niz

atio

nO

the

r im

port

an

tva

ria

ble

s

More important

Source: BBVA Research.


Urbanization-related variables are among the few drivers of digitization

in which Latam performs better than developed countries

Main drivers of digital banking (2015)

Source: BBVA Research and United Nations. Aggregation by region using a simple average .

*Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, Uruguay and Venezuela

0

10

20

30

40

50

60

70

80

90

100

Affluent(High incomepopulation)

High/Mediummiddleclasses

Low middleclasses

Urbanpopulation insmall cities

Urbanpopulation in

big cities

Urbanpopulation in

mediumcities

PopulationMedian Age

Credit Gini

0

0.5

1

1.5

2

2.5

3

3.5

4

RegulatoryQuality

TertiaryEducation

HouseholdSize

0

200

400

600

800

1000

1200

1400

1600

1800

Density ofrural areas

Density ofUrbanareas

Latam* Developed World Emerging markets excluding Latam

0

5

10

15

20

25

30

35

40

45

50

Other effects(GDP PPP inthousands)

Th

ou

san

ds


1. Urbanization trends

Urbanization in Latin America: main messages

18

2. Urbanization and income

3. Urbanization and digitization

Urbanization levels have

increased significantly in Latin

America since 1950.

Urbanization is now around 80%

in Latin American countries, more

than in most of the other regions.

After a sharp growth, urbanization

in Latin America exhibits signs of

moderation. Over the next

decades it will expand below the

world average.

Urbanization is positively

correlated with income per capita,

as well as with capital, labor and

productivity (TFP) measures.

However, in spite of displaying

high urbanization rates, Latin

American countries show relatively

low levels of income, capital, labor

and productivity.

Prospects of milder expansion of

urbanization ahead represent a

challenge in terms of growth for

the region.

Urbanization is also positively

associated with digitization.

Latin America countries should try

to leverage on their high

urbanization levels to boost

digitization.


ANNEX


RIO NEGRO

BUENOS AIRES

SAN LUIS

NEUQUEN

SANTA CRUZ

SANTIAGO DEL ESTERO

TIERRA DEL FUEGO

R² = 0.5861

0

1

2

3

4

5

6

60 70 80 90 100

GD

P p

er

capita in 2

008 (

logarith

m)

Urban population (% total) in 2010

GDP per capita and urbanization are also positively correlated

within Latam countries

Argentina (GDP per capita in 2008 and urbanization rates in 2010)

Brazil (GDP per capita in 2014 and urbanization rates in 2010)

Chile (GDP per capita and urbanization rates in 2012)

Source: BBVA Research, CEPAL and National Demographic

statistics..

AMAPÁ

MARANHÃO

SANTA CATARINA

FEDERAL DISTRICT

ALAGOAS

RIO DE JANEIRO

SAO PAULO

R² = 0.7457

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

50 60 70 80 90 100

GD

P p

er

capita in 2

014 (

logarith

m)


REGION VIII

REGION II

REGION VI

REGION XI

REGION OF SANTIAGO

REGION III

R² = 0.5785

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

60 70 80 90 100

GD

P p

er

capita in 2

012 (

logarith

m)



Source: BBVA Research, CEPAL and National Demographic

statistics.

Mexico (GDP per capita in 2015 and urbanization rates in 2010)

Colombia (GDP per capita and urbanization rates in 2015)

Peru (GDP per capita and urbanization rates in 2007)

GDP per capita and urbanization are also positively correlated

within Latam countries

PASCO

MOQUEGUA

HUANUCO

LIMA

TUMBES

R² = 0.3866

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

20 30 40 50 60 70 80 90 100

GD

P p

er

capita in 2

007 (

logarith

m)


SANTANDER BOGOTA D.C.

META

BOYACA

QUINDIO

CASANARE

VAUPÉS

GUAINÍA

R² = 0.3674

3.5

3.7

3.9

4.1

4.3

4.5

4.7

30 50 70 90 110

GD

P p

er

capita in 2

015 (

logarith

m)


CAMPECHE

MEXICO CITY

CHIAPAS

HIDALGO

TLAXCALA

TABASCO R² = 0.244

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

35 45 55 65 75 85 95

GD

P p

er

capita in 2

015

(lo

garith

m)


Urbanization in Latin America - Microsoft · Urbanization in Latin America 1. Urbanization trends...

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