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Latin America is well on its way to becoming an economic force to reckon with by 2025, spurred by transformative and global forces termed mega trends. Rising disposable incomes and a Gen Y population of more than 200 million not only makes this region one of the most attractive investment destinations in the world, but also a source of capital for companies globally.
New analysis from Frost & Sullivan, Mega Trends in Latin America, identified more than 10 key mega trends that will accelerate Latin America's growth rate to 6.5% per year by 2025. Fueled by growth in middle class (461 million), urbanization (567 million people living in urban areas), increased infrastructure spending ($1.5 trillion) and improved connectivity (1.3 billion connected devices), Latin America is likely to become one of the most important markets globally, with a gross domestic product of $15.14 trillion by 2025.
"Increasing urbanization is expected to bring about spatial changes to cities, and create five mega-cities, four mega-regions and two mega-corridors in 2025," said Frost & Sullivan research manager Lorena Isla. "Urbanization will also generate many investment opportunities in smart infrastructure and new market opportunities for innovative products targeting urban households."
The rising inclusion of women will bring this consumer segment into focus due to their higher spending power. Women are expected to represent more than 46% of the total working population, holding around 34% of total decision-making positions by 2025. The empowerment of this demographic will stimulate demand for personal products and services, and luxury goods as well.
Meanwhile, almost 70 million people in Latin America will be aged over 60 years by 2020, which could cause health care expenditure to reach $580 billion by 2015, giving a boost to associated sectors.
Interestingly, most governments across the region are aiming to make Latin America a connected continent. The region is expected to have around 1.3 billion connected devices by 2016, including mobile phones, tablets and other machine-to-machine connected devices, both in urban and rural areas.
"The proliferation of devices will be driven by the greater broadband penetration and 4G roll-out of 2011," noted Isla. "The robust growth of mobile subscribers, reaching more than 705 million by 2016, will support new business models designed for emerging consumer segments."
Electronification of sectors such as governance, entrepreneurship, education, commerce and medicine will provide further impetus to the common goal of connectivity. Six major Latin American economies also plan to implement the analog TV switch-off in 2019.
Growth in such diverse industries is likely to attract more investments to trailing sectors such as infrastructure. Airport, energy, telecom infrastructure and space jam are all likely to benefit substantially from investors' interest in end-user markets.