Growing together: BoP and the private sector in Latin America

The BoP in Latin America and the Caribbean live on less than $10 a day. That description matches 70% of the population in Latin America (1). But if you happen to visit a random country of that region, you will find that the mentioned 70% is not what we would traditionally imagine as people who live in the bottom of the pyramid. You actually see many of them carrying smartphones, branded clothing, having soda, buying cosmetics, going to clubs - typical consumers, as a matter of speaking. That is certainly unexpected…or not?

To understand this phenomenon, the BoP can be divided in two groups: people living with $4 a day or less (2) and the ones living with $4 to $10 a day, also called vulnerable population. Both lack certain basic services, some of them emphasized by the IDB (Inter-American Development Bank): financial services, health, transportation, housing, education and sanitation. However, the second category has been growing while the first one has been shrinking. This is a sector of the population that demands quality services, and that is currently underserved. And that, for businesses, means one word: opportunities. Opportunities that could move over $500 billion (3). Opportunities that will benefit both the private sector and the population.

Those raw numbers do sound very appealing. In order to sound even more compelling, I will present a fact I find very interesting: the richest person in Peru is the owner of a company where the majority of the sales force comes from and serves the BoP, among other customers. Belcorp, the company that made this businessman one of Forbes 1000 richest men on earth in 2014 (4), is a direct sales beauty company whose vision is to empower women. They achieve so by their sales model: according to them, “direct sales is an opportunity for thousands of women to achieve their goals, transforming their lives and their environment” (5).

It does make a difference when big companies invest and work on the BoP market. However, Latin America’s main source of employment are not big companies, but small and medium businesses. To be more accurate, 99% of the companies in the region are SMBs (locally known as PYMES), businesses that hire 67% of the population (6). What if governments provided incentives to make SMBs serve the BoP? Just imagine the variety of services and products they would be able to offer them. Furthermore, this companies could both sell to and employ people from the BoP. SMBs would have a very interesting challenge too, as those customers are looking for quality, risk-free solutions over than cheap products (7). This dynamic would create a win-win scenario for everybody. SMBs would exploit a new market, generating more revenue; people in the BoP would have access to more and better quality products and services; governments would benefit for a decrease in poverty, an increase on the country’s GDP, and more competitive local employers and employees. There are already initiatives that pursue motivating companies and entrepreneurs to invest on this market, Opportunities for the Majority (from the IDB) being an important example. Capitalizing them will not generate only money: it will spark the growth of a subcontinent and impact the lives of millions of people.  

(1) theguardian.com: The evolution of the BoP market in Latin America and the Caribbean. http://www.theguardian.com/sustainable-business/2015/may/12/the-evolution-of-the-bop-market-in-latin-america-and-the-caribbean. Visited on September 21^st, 2015

(2) eluniversal.com.mx: Poblacion vulnerable, una oportunidad: BID. http://www.eluniversal.com.mx/articulo/cartera/economia/2015/07/1/poblacion-vulnerable-una-oportunidad-bid. Visited on September 21^st, 2015

(3) Inter-American Development Bank: Opportunities for the Majority Frequently Asked Questions. http://www.iadb.org/en/topics/opportunities-for-the-majority/om-frequently-asked-questions-faqs,1475.html. Visited on September 21^st, 2015.

(4) Forbes profile: Eduardo Belmont. http://www.forbes.com/profile/eduardo-belmont-anderson/. Visited on September 20^th, 2015

(5) Belcorp: Nuestro Modelo de Negocio. https://www.belcorp.biz/somosbelcorp/modelodenegocio.html, visited on September 20^th, 2015.

(6) El Heraldo.co: El crecimiento de América Latina pasa por las pymes. http://www.elheraldo.co/economia/el-crecimiento-de-america-latina-pasa-por-las-pymes-197398. Colombia, May 31st 2015.