By 2030, the world will host 39 megacities* which will harbor 9% of the global population; generate 15% of global GDP; and represent 3% of the earth's land mass, according to Euromonitor International's recent white paper Megacities: Developing Country Domination. While Asia Pacific has the largest number of megacities – 19 of the world's 33 as of 2017 – Latin America currently hosts five: Lima, Mexico City, Rio de Janeiro, São Paulo and Buenos Aires. [*Euromonitor International defines megacities as urbanized conurbations housing 10+ million inhabitants]
LATAM – where economic woes are 'slowly diminishing'
Currently, 81% of Latin America was urban and this was set to stretch to 83% by 2030, according to Euromonitor International. But growth in recent years had “fallen short” compared to other world regions, namely Asia Pacific, the Middle East and Africa, largely due to the economical landscape – a constraining factor that was now changing, its report said.
“The economic woes are (…) slowly diminishing, and households in the region's major cities are poised to see a surge in affluence. The Brazilian trio of São Paulo, Rio de Janeiro and Belo Horizonte will experience some of the largest gains in economic growth over 2018-2023, compared to the previous five-year period to 2018 which saw the cities being burdened by economic stagnation.”
Seven out of Latin America's 10 largest cities, for example, would display higher rates of economic growth over 2018-2023, compared to 2013-2018, and while growth was set to be “somewhat subdued”, such change “augurs favorably for the region's recovery”, Euromonitor International said.
All cities in the region, except Buenos Aires due to Argentina's ongoing recession, would see a reduction in the size of the poorest income bracket – those earning less than US$10,000 per annum – as more households entered the middle-class, for example. And Mexico City would lead growth of the urban middle-class, adding 254,000 households in the US$25,000-45,000 income bracket over 2018-2023.
Breaking down 'systematic challenges'
“Nonetheless, systematic challenges still exist,” Euromonitor International wrote. “Corruption scandals, unfavorable tax procedures and lengthy bureaucratic processes are hampering business growth and competition in Latin America. Removing these unnecessary burdens and diversifying the region's economies away from the export of commodities is in national governments' interest.”
Understanding the opportunities and challenges associated with working in megacities remained vital for any business, the research provider said.
“Megacities are significant for businesses since they concentrate wealth, income and business opportunities. The adverse externalities they create through excessive pollution of traffic congestion, concurrently fosters urban challenges and opportunities which necessitate innovative solutions to maintain economic appeal. Understanding the economic and demographic composition of megacities, as well as the direction of expected changes can help businesses implement the appropriate business models to achieve future success.”
“...As consumer markets, megacities make ideal setting for businesses to form entry or expansionary strategies; but they should be treated as individual consumer markets,” Euromonitor International said.
Ones to watch? Lima and Bogotá
The Peruvian capital Lima, while currently ranked as having the 4th largest unemployment rate within the global megacity network, would see the most significant real GDP growth in Latin America. The capital would also witness a population surge of more than 15% between 2017-2030, ranking it the tenth fastest-growing megacity globally, in population terms.
Lima's inflation levels were also lower than its Latin American megacity counterparts in 2017, at 2.8% compared to 25.5% in Buenos Aires at 25.5%; 6% in Mexico City; and 3.5% in Rio de Janeiro and São Paulo.
Between 2017 and 2030, Euromonitor International said six new cities would join the global megacity network: Bogotá, Chennai, Luanda, Chicago, Dar es Salaam and Baghdad.
Colombia's capital Bogotá was set to generate a total GDP of US$109 billion in 2030 – the second-largest of the new entries behind Chicago set to generate US$596bn GDP.