Over the roughly 10 years leading up to 2013, at the tail end of the region’s urban explosion, things seemed to be looking up for Latin America. Rising commodity prices and increased demand for raw materials from China catalyzed an economic boom that led to a significant reduction in poverty and, as noted by Moisés Naím in The Atlantic, an unprecedented decline in inequality, creating the largest middle class in Latin American history.
The region also weathered the 2008 financial crisis better than some larger and more developed economies, giving the impression that its growth was here to stay. And the impression seems to have stuck, at least with young adults: a survey commissioned late last year by the Citi Foundation found that city-dwelling Latin American youth were among the most optimistic in the world about their economic futures, even though their cities scored relatively low on the study’s economic opportunity index.
Ostensibly, that’s a great thing. Research has found that optimism and a belief in one’s own future actually create better economic outcomes, because people who believe in their futures are more likely to invest in them. But Latin America’s young urbanites may be in for a rude awakening. Over the past five years, economic growth in the region has slowed, and things are not looking up.
The price of commodities has fallen, reducing Latin America’s terms of trade. Brazil is stuck in an unrelenting recession. And the region’s megacities are growing at a slower pace than cities in any other part of the world.
So what explains the enduring optimism of Latin America’s urban youth? And, more importantly, what happens if Latin America’s cities can’t live up to their expectations?
A False Sense of Security?
The authors of the Citi Foundation’s study can’t pinpoint the cause of youth optimism in cities where GDP and other economic indicators are low, but they do offer up some guesses.
“Some of the cities with a lower GDP happen to be places where the most economic growth is happening,” says Brandee McHale, President of the Citi Foundation. “So even if the overall GDP is low, young people are growing up seeing development happening around them. We can’t prove exact causation, but what we’re inferring from this is that when [young people] see a dynamic, growth-focused environment, they’re very optimistic.”
In other words, these regions may not have a high GDP, but they have a high level of GDP growth. Young people witnessing that boom of growth will, reasonably, tend to feel optimistic about their economic futures.
That theory holds a little more steadily in the optimistic developing economies of Asia, where GDP is low but growth remains consistently high. The lowest growth rate among these economies was Bangkok at 4.7 percent, according to the study data, and the highest was Beijing, at 8.8 percent. In contrast, the lowest growth rate of the optimistic Latin American economies was Buenos Aires at -0.3 percent (a contraction), and the highest was Panama City at 6.8 percent, still behind the highest performing Asian cities .
São Paulo, Brazil, had one of the most optimistic populations of young people among all the cities surveyed, despite coming in at just 2.1 percent GDP growth, lower than any Asian city surveyed. (For a more detailed look at the study’s results, you can download the interactive database tool here). That’s especially astonishing when you consider the broader economic climate in Brazil, which has been struggling through recession for years now. The slow growth of Brazilian cities has in fact dragged the entire region’s growth.
Several Latin American cities still displayed higher levels of growth than cities in developed regions (a common trend among the cities studied). But the relationship between GDP growth rates and optimism was inconsistent in the region, and doesn’t seem to explain young Latin Americans’ belief in a bright future despite their cities scoring low on indexes of economic performance.
Cultural Optimism and Improved Circumstance
Carol Graham, a senior fellow at the Brookings Institution who has studied the economics of happiness and well-being around the world, believes the study results are picking up on two things.
“I grew up in Latin America and it’s generally a culturally cheerful place,” says Graham. “People love their families, they make time to eat together, they love music. There is a cheerfulness woven throughout the culture that I think drives up the average [happiness] scores,” she says.
So maybe Latin American young people feel good about the future because they generally feel good about everything—optimism is ingrained in their cultural worldview.
Graham also notes that as Latin Americans’ material circumstances have improved over the past decade and a half, their sense of well-being has gone up too. Even the poorest sectors of Latin American society have had their burdens eased by far-reaching social programs. And perhaps even more important are the social attitudes that Latin Americans adopt toward the poor.
“In the U.S., we stigmatize our poor. The ideological discussion is that if you’re poor, it’s your fault,” Graham says. Not so in Latin America, where large, effective conditional cash transfer programs have helped lift millions out of poverty.
Which brings us to the next key question: What happens when slow growth turns into economic contraction, and all the progress achieved by social programs starts to diminish?
A Shaky Future
In his story last year for The Atlantic, Moisés Naím foreshadows the “coming turmoil” in Latin America, pointing to the region’s recent negative economic indicators and the danger they pose to the newly established middle class.
That middle class, he argues, with its increased political potency and expectation, in turn poses a threat to established governments in the region as a whole. From his piece:
Relative to poorer citizens, members of the middle class often feel more politically empowered and connected; their expectations of government rise in tandem with their economic status, and they are in a better position to organize and demand that those expectations be met. This organization often comes in the form of anti-government street protests, which have grown frequent from Mexico to Argentina.
Those protests (while they have the obvious potential to oust politically corrupt regimes and set entire countries on a better track) could lead to long-term political instability in the region, which isn’t particularly good news for the economy either.
In cities that fail to live up to the economic expectations of their youth populations, it’s not hard to see how this scenario could play out: Anger and resentment, building up over time, among those who grow up hearing promises that never come true.
It’s also possible that many young people won’t bother to stick around to protest at all. The Citi Foundation study found that Latin American youth were among the most likely to have moved to a new city within the last five years (77 percent of respondents in São Paulo, in fact, had moved there within the last five years, the highest share of any city in the study). And among those who had moved at least once before, 85 percent said they would move again if they couldn’t find economic opportunities where they were—a greater share than any other region in the survey. In other words: young people in Latin American cities are not afraid to leave if they have to.
That finding presents a serious risk of brain drain across Latin America, one that could spell an even deeper disaster for cities (and countries) that depend on bright young people to round out their work forces.
“Having large swaths of the population pick up and migrate really starts the whole process all over again [for cities],” McHale says. “And if we’re thinking about the economic competitiveness and the future health of cities, this is something they’re really going to want to address.”