Report on wealthy Latins is troubling

Get this: Latin America’s rich are getting richer than their counterparts in all other regions of the world, and have already amassed $6.2 trillion in financial assets — not counting their homes and art collections.

According to the 2008 World Wealth Report, a new study released by the international consulting firm Capgemini and Merrill Lynch, over the past three years the richest people in Latin America increased their wealth by 20.4 percent.

By comparison, the rich in oil-rich Middle Eastern countries saw their bank accounts grow by 17.5 percent over the same period, in Africa by 15 percent, in Asia by 12.5 percent, in Europe by 5.3 percent, and in the United States and Canada by 4.4 percent.

The study, based on confidential information from several international wealth management firms, says the good fortunes of Latin America’s rich were largely due to the boom in commodity prices.

Ileana Van Der Linde, a Capgemini spokeswoman, told me that Brazil, Venezuela and Chile saw the most growth in Latin America. She declined to give country-specific figures.

Among the study’s other findings:

The total wealth of Latin America’s high-net-worth individuals, or people who have more than $1 million in liquid savings, excluding collectibles and primary residences, increased from $4.2 trillion in 2005 to $6.2 trillion in 2007.

Region’s rich

The total wealth figure of Latin America’s rich is expected to keep rising and reach $10.3 trillion by 2012 — more than double what it was in 2005. This means that the total wealth of the region’s rich will increase at a rate of 10.8 percent a year, compared with a worldwide rate of 7.7 percent.

Regarding the “ultra-rich,” or people who have more than $30 million in liquid savings, not counting collectibles and primary homes, Latin America has the world’s highest concentration of them. About 2.5 percent of the region’s rich are “ultra-rich,” compared with 2 percent in Africa and 1.1 percent in the Middle East.

Unlike last year, in which the World Wealth Report stated that Latin America’s rich are the least generous of their breed around the world, the 2008 report does not touch on the charity issue. Last year’s report said that while Latin America’s rich devote only 3 percent of their financial assets to charity; Asian tycoons donate 12 percent of their money; the Middle Eastern wealthy give out 8 percent, and Americans, 12 percent.

At the time, I said in this column that while these figures may not tell the whole story — many Latin American tycoons donate confidentially, because they fear becoming targets of kidnappings or extortion — they raise serious questions about whether Latin American elites should not be more generous. Van Der Linde said the study focuses on different issues every year, and that this year it focused on green investments.

The Capgemini-Merrill Lynch study comes out shortly after the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) released a report stating that Latin America’s middle class is smaller than the world’s average.

Middle classes

It accounts for 57 percent of Latin America’s total income, compared with an average 62 percent by middle classes in the rest of the world, it says.

My opinion: The steady concentration of wealth within Latin America should set off alarm bells.

It suggests that the region’s recent five years of steady economic growth may not have translated into creation of a new middle class of tens of millions of small entrepreneurs, but rather led the very rich to become even richer.

What to do about it?

Banging against the table and blaming the region’s poverty on the rich will only make things worse.

Latin America’s tycoons will put more of their money in foreign banks and invest less in their countries, which will increase unemployment and cause wider poverty.

But, clearly, not enough has been done to encourage creation of small enterprises and expanding the middle class.

X Andres Oppenheimer is a Latin America correspondent for the Miami Herald. Distributed by McClatchy-Tribune.