Class Structure in Modern Latin America

The class structures of Latin America are determined by the social relationships of basic economic activities. These relationships include property ownership, labor arrangements, forms and sources of income, and patterns of supervision and subordination, among others. In addition, some groups of people may be confined to certain jobs or discriminated against on the basis of gender, race, ethnicity, and so on. All of these factors contribute to the formation and characteristics of contemporary social classes. Given the great diversity among Latin American countries, the following discussion should be considered mainly as a portrayal of general regional patterns.

CLASS STRUCTURE IN HISTORICAL PERSPECTIVE

To understand modern-day class structures, it is imperative to review the historical forces that have shaped them since the mid-nineteenth century. Between roughly 1850 and 1930, national governments pursued an "outward-looking" development model based on the export of primary agricultural and mineral commodities and the import of manufactured goods from Europe (and later the United States). The creation of large-scale export economies entailed profound transformations of class relations.

In the countryside, landholding patterns were altered, legally and/or forcibly, to facilitate the creation of large enterprises devoted to export crops, such as coffee in Central America, northern South America, and Brazil, and wheat in the Southern Cone. Estate labor needs were met by transforming rural migrants into full-time or part-time laborers. Where labor was scarce, as in Argentina and southern Brazil, European immigrants were contracted. In the Caribbean, meanwhile, growth was driven by the creation of a banana export economy and the revival of sugar, mainly on foreign-owned plantations. Labor forces were largely recruited from among ex-slaves and their descendants.

In highland regions the rise or resurgence of mining export economies reflected new demands for industrial minerals. Copper and tin mining altered the course of development in Chile, Bolivia, and Peru, while oil discoveries transformed Venezuela and Mexico. The organization of mining economies followed that of plantation agriculture in their dependence on foreign capital and permanent wage labor forces.

These developments had several important effects on social structures. Landowning classes were greatly empowered, politically as well as economically. The industrial-style organization of plantation and mining economies facilitated the emergence of the first large labor unions in the region. In the cities, the largest urban merchants linked to export-import trade began to emerge among national elites. Manufacturing remained relatively small and largely artisanal in nature. Middle classes were weak, although by the turn of the century they were expanding in the larger countries with the growth of public sector employment.

The export-import national development model was highly vulnerable to the shifting fortunes of the international economy, and the narrow distribution of benefits impeded the creation of dynamic domestic markets. Consequently the Great Depression of the 1930s and the drastic downturn in international trade, which persisted until after World War II, created a general sense of crisis throughout the hemisphere.

One response to this crisis was populism, such as the movements led by Juan Perón in Argentina, Víctor Raúl Haya de la Torre in Peru, Getúlio Vargas in Brazil, and Lázaro Cárdenas in Mexico. Populist governments shared such features as anti-imperialism and hostility to foreign capital, mass-based appeals to play off against traditional elites, support for labor unions, and a new emphasis on state intervention in the economy. Elsewhere in the region, authoritarian regimes clamped down on popular unrest in response to the crisis. These governments, however, also felt compelled to take a more active role in economic management. Thus one far-reaching outcome of the crisis of the old model was a dramatic expansion of Latin American states.

The new economic model of the period was import-substituting industrialization (ISI), defined by the replacement of manufacturing imports with the output of domestic industries. Where local private investment was inadequate to sustain this process, the state was assigned a leading role in building an industrial base. After 1945, protectionist policies were adopted to shield the new industries from European and North American competition. In the larger countries of the region (and later in the smaller ones, following the implementation of regional integration schemes), the protected domestic markets proved attractive to new foreign investment, chiefly by U.S.-based firms.

The growth of industry and expansion of the state ignited a rapid process of urbanization. With both working-class and middle-class employment growing, the major Latin American cities proved irresistible magnets for migrants from smaller towns and the countryside. Rural-urban migration was also spurred by the transformation of agrarian economies. New postwar export opportunities, as well as the growing urban demand for food, generated a renewed expansion of large-scale agriculture. This development generally was unfavorable to rural smallholders and laborers because new employment opportunities were offset by reduced access to good farmland and the effects of labor-saving technologies. Combined with high rates of population growth, these changes swelled the cityward exodus.

Class structures were profoundly altered by these developments. Dominant class interests were diversified to incorporate domestic and transnational manufacturing sectors alongside the traditional export and mercantile groups. A growing middle class was nurtured by the rapid growth of state bureaucracies as well as opportunities among larger private firms. Industrial working classes were expanding as well. By 1960 the majority of Latin America's economically active population was employed in nonagricultural work, and the proportion in manufacturing had reached as high as 34 percent in Argentina, 30 percent in Chile, and around 20 percent in Mexico, Peru, and Brazil.

Nonetheless, this expansion was outpaced by high population growth and migration. Consequently Latin American cities witnessed the proliferation of the informal sectors. Growing numbers of residents were forced to improvise their livelihoods as street vendors, providers of personal services, and part-time or temporary wage laborers. Characterized by myriad subsistence strategies, the informal sectors were largely unregulated by the state and bereft of benefits or security for workers. Their most visible manifestation was the sprawling shantytowns and squatter settlements that spread across Latin American cities during the 1950s and 1960s.

In the countryside, as small farms became more difficult to sustain, rural workers and smallholders were increasingly forced to depend on seasonal wage labor and nonagricultural employment. Remittances from family members in the cities came to play an important role in many rural communities. Most Latin American governments attempted to shore up rural agriculture and employment with agrarian reform programs during the 1960s, but in general these programs were hampered by dominant class opposition and government inability to provide support (such as credit, technical assistance, and market access) for reform projects.

Agrarian reform did serve to mobilize the rural population politically, however, and the 1960s saw rising working-class protests linked to both populist and socialist political movements. Growing elite resistance to reforms fueled an increasing willingness on the left to embrace revolutionary alternatives. The resulting confrontational spiral was brought to a violent halt by the authoritarian, military-led regimes that swept across the region beginning with Brazil in 1964.

The advent of repressive military regimes in the 1960s and 1970s did not greatly alter the state-centered, ISI-based development model. During the 1970s military governments presided over major state initiatives drawing on cheap, easily obtained credit from international banks. In the early 1980s, however, debt repayment and interest obligations began to mount just as a global recession reduced new capital inflows and depressed Latin America's trade balances. Most governments were compelled to rely on the assistance (and policy prescriptions) of the International Monetary Fund (IMF) and other global financial institutions. Facing rising popular opposition, decreasing support from dominant groups, and economic crisis, military leaders were forced to restore executive office to civilian hands.

The new civilian leaders faced the daunting challenge of strengthening democracy while pursuing the reactivation of their economies within the context of IMF restrictions. Thus, since the mid-1980s, diverse governments have pursued similar economic strategies. They have opened up their economies by removing protectionist tariffs and other trade barriers, promoting foreign investment, privatizing state enterprises, and reducing subsidies for public services. This neoliberal approach has generated substantial popular resistance but remains the predominant development model in the early twenty-first century and an important determinant of class structures.

RURAL CLASS STRUCTURES SINCE THE 1990S

The traditional relationships of landlord and peasant that helped to define Latin American societies all but disappeared in the 1990s. Large estates are no longer so large, in many cases having been curtailed by agrarian reform in the 1960s, and farms devoted to exports are more likely to be run according to strictly capitalistic criteria. Moreover, rural society in general is much more closely linked to the major urban centers and national economic and political forces. The incidence of poverty, however, remains 60 percent of the rural population for Latin America as a whole.

Agrarian elites are less easily characterized as oligarchies. Large farms are likely to be run by managers, while owners may be impersonal corporations or city dwellers with diversified economic interests. A typical example is the transformation between the mid-1980s and the mid-1990s of the Salvadoran coffee oligarchy into a modernized elite based on banking and industrial and commercial assets. Rural elite interests tend to be promoted through professional associations and political parties rather than through the direct exercise of coercive power. This evolution has fundamentally altered rural class relations; small landholders and rural workers now deal with entrepreneurs, commercial intermediaries, and state agencies rather than traditional large landowners.

The rural population has both gained and suffered as a result of these changes. On the one hand, rural people are freer to organize themselves, pursue political alliances, and negotiate with state agencies. The disappearance of military regimes has also contributed to the rise of organized rural activism in countries such as Bolivia, Brazil, and Peru. Rural educational levels and access to basic services have risen as well. On the other hand, the advancing modernization of agriculture has reduced employment opportunities. In the context of continuing population growth, the migratory outflow from the countryside has continued.

A further challenge to the rural economy since 1980 has been the elimination of the agrarian reform policies that had sought to shore up smallholders' agriculture. Even where such policies had not been suspended earlier by military dictatorships, the prescriptions of economic liberalization have been to curtail state efforts to redistribute land and organize production, relying instead on market forces to drive rural development.

The net effect of these changes has been to accelerate both the differentiation of Latin American peasantries and their integration into larger social structures. Viable small farms persist in some regions, especially where proximity to urban centers guarantees a stable demand for food crops. The largest farm enterprises still provide permanent wage employment for a significant group of workers. The majority of rural families, however, are pursuing diversified subsistence strategies that may combine cultivation of tiny plots, occasional wage labor on larger farms, and off-farm sources of income. Among the most important sources of the latter are nonagricultural employment (for instance, in rural food-processing or manufacturing assembly plants) and remittances from family members who have moved to the city or even out of the country. Many rural communities in Mexico, El Salvador, and the Dominican Republic, for example, increasingly were sustained by family remittances from the United States by the early 1990s. In the early twenty-first century the remittance stream coming in from the United States and some countries of the European Union (especially Spain) is a vital lifeline for the rural and the urban poor population. Data from the UN Economic Commission for Latin America and the Caribbean (ECLAC) indicate that the outgoing remittance stream from the United States to Latin America alone was $45 billion in 2004, a quantity larger than the volume of the direct foreign investment and the amount of foreign aid together. Of this total, 55 percent went to Mexico and Central America. An annual remittance stream of $8 billion keeps the economies of El Salvador, Honduras, Guatemala, and Nicaragua afloat.

URBAN CLASS STRUCTURES SINCE THE 1990S

The dominant classes are a very small proportion of the economically active population in modern Latin American societies. Their ranks are characterized by diverse interests, however, including the traditional export and mercantile sectors, transnational and domestic manufacturing, services (banking in particular), and even large state-owned enterprises. The crisis of the 1980s and the ascendance of neoliberalism have altered the dominant class profile. Privatization policies are gradually doing away with state enterprises; transnational firms have acquired many of them. Among private firms, those best able to cope with prevailing economic conditions have been those least reliant on the domestic market and more geared toward nontraditional exports, as well as those with the capacity to spread their resources across borders and foreign currencies. Increasingly, transnational capital refers not just to U.S.-, European-, or Asian-based firms operating in Latin America but also to Latin American firms and investors who have looked abroad for greater security or greater returns.

The middle classes include professionals, midlevel managerial and technical personnel, and career-oriented government employees. While these groups remain considerably better off than the working classes, the economic downturn of the 1980s represented a blow, as the expectations of upward mobility and increased consumer buying power that earlier had accompanied economic growth were suddenly dashed. Emigration has become a more attractive option among these groups, as has that of abandoning work in large firms to start small businesses.

Public sector employees have been especially affected. By the 1980s the public sector accounted for between 15 and 30 percent of total urban employment in most Latin American countries. The curtailment of government spending resulting from the debt crisis and readjustment policies has signified a major decrease in real wages and living standards for public sector employees, although the number of jobs has generally remained stable. The incidence of poverty has risen to encompass around one-fourth of all civil servants in Brazil, Mexico, and Venezuela.

The formal working class has been perhaps the hardest hit of all classes by economic trends since the 1980s. During that decade employment in manufacturing throughout the region declined sharply relative to services, and in several cases declined in absolute terms as well. The number of workers in manufacturing in Argentina declined by 29 percent from 1980 to 1990; Peru and Brazil experienced drops of 19 percent and 13 percent respectively. Open unemployment rates soared in most major cities. For those who kept their jobs, incomes headed downward. Over the same decade, real wages in the manufacturing sector fell by 45 percent in Venezuela, 24 percent in Argentina, 18 percent in Brazil, and 8 percent in Mexico.

Workers have found it difficult to defend their interests. Labor unions, weakened during the years of repression and military rule, have been further affected by declining employment in some of the industries where they were once strongest, notably mining. A related factor of the "lost decade" of the 1980s was the shrinking electoral fortunes of Socialist and Communist political parties in the 1990s, once devoted to the cause of organized labor but now forced to seek compromise in electoral coalitions. Both on the right and on the left, an important political shift has occurred, as traditional class-based strategies have been replaced by coalition-building and cross-class appeals.

One noteworthy exception to the pattern of declining industrial employment has been the phenomenal growth of maquiladoras, best known in Mexico but also expanding in Central America and in some Andean countries. These are export processing plants established under special concessionary regulations; textiles and clothing, food processing, and electronics are the typical industries. In Mexico, employment in this sector more than quadrupled during the 1980s. Perhaps the most significant contribution of the maquiladora industries to the changing class structure of Latin America has been their heavy reliance on female labor.

The evolution of the informal sectors since 1980 has been complex. On the one hand, many informal workers have experienced deteriorating living standards. Contributing factors include the swelling of the informal labor force by those displaced from formal employment, the further overcrowding of housing in the shantytowns and poor neighborhoods, the decline in part-time or casual wage labor (in such fields as construction), and the reduction in state services, subsidies, and other programs aimed at the poor. On the other hand, the same downturn produced new economic opportunities. Depressed earnings of middle- and working-class consumers have translated into greater demand for goods produced cheaply by informal businesses and street vendors. Other informal entrepreneurs are producing inputs needed by large formal sector firms through piece-rate work and home work—arrangements replacing inputs previously produced by formal sector firms.

Thus increasing urban poverty levels have masked some informal success stories. In Otavalo, Ecuador, Indian entrepreneurs have established small weaving operations in which workers turn out jeans and shirts for the national market and luxury woolen items for export. In another case, Uruguayan women working in cooperatives have also developed a thriving garment industry using an umbrella organization that operates wholesale outlets in the capital city of Montevideo, supplying both domestic and export markets.

Perhaps the most remarkable example is Gamarra, a former slum conglomerate near the very center of Peru's capital city, Lima, where a kind of informal middle class of textile entrepreneurs emerged from the formerly self-employed and informal workers. The most audacious entrepreneurs diversified their assets afterward to other economic sectors. The first unregistered micro-enterprises started in the early 1970s as house-and-work talleres of the new provincial migrants around Lima's popular food and groceries market of those days in the La Victoria district. Houses were transformed in talleres, thirty or forty per block, generally 50 percent of the existing quarters. Specialized financial institutes discovered a potential clientele: entrepreneurs, with their extended and symbolic family as backbone and confianza (personal trust) as the basic relation between the entrepreneur and the work force and between the members of the entrepreneurial circuit. By 2007 more than sixty thousand artisans and micro-entrepreneurs with their workers were associated in industrial-commercial cooperatives that administered the Gamarra industrial and commercial infrastructure. Other clusters of interdependent talleres and small service enterprises specializing in a certain sector (textiles, shoes, metallurgy, plastics) are the typical advance industries in all slum cities around Lima.

These examples demonstrate the increasing class differentiation within the informal economy and society. It is, however, also a fact of life that most of those who find employment in the informal economy are surviving under very precarious conditions.

SIGNIFICANCE OF OTHER SOCIAL CLEAVAGES

It is important to recognize that other social divisions cut across class structure and help to determine the specific characteristics and identities associated with social classes. The most important of these distinctions are gender and ethnicity.

Between 1950 and 1980 Latin America witnessed a slow but steady expansion of women's participation in the labor force. This was largely the consequence of broader patterns of social change, including urbanization, higher educational achievement, evolving labor markets, and associated changes in cultural values. Women's employment was highly segmented, however, with jobs concentrated in the areas of personal (including domestic) services, office services, and sales.

As with the informal sector as a whole, women experienced contradictory developments during the crisis of the 1980s. Unemployment rates for women generally increased faster than those for men, reflecting a relative decline in formal employment opportunities. At the same time, however, younger women were entering the labor force at an accelerated rate because families needed additional workers to offset the declining incomes of those already working. Much of this additional labor was absorbed in small-scale informal sector activities.

New opportunities arose with the appearance of nontraditional export industries. In the countryside, large firms producing commodities such as cut flowers in Colombia or fresh fruit in Chile hired women to do the processing or packing. This gender-based preference was mirrored in the maquiladora industries. Women were also hired preferentially for "home work": jobs in which parts of production processes (such as for shoes and clothing) are subcontracted to individual workers to carry out in their homes. These opportunities have carried a cost, however: women workers have been consistently subject to discriminatory wage rates (relative to men), extreme job insecurity, and difficult work environments. The persistence of discriminatory practices, along with other gender-based issues, has helped spark the rapid growth of women's organizations. These movements represent an increasingly active presence in the Latin American political arena.

Ethnic divisions represent a defining aspect of Latin American and Caribbean class structures. The colonial reliance on native Americans and African slaves as a labor force for European conquerors has been an enduring legacy. Despite the vast changes that have since occurred, it remains true that throughout the hemisphere, to be identifiably Indian or black is to rank lower in economic, political, and social status than those who are nonindigenous or non-black. There is great variation across countries and regions in how these inequalities are expressed, but a few major trends are worth noting.

Latin America's original indigenous peoples have been largely assimilated or confined to remote areas in many countries of the region but remain a substantial component of the population in Mesoamerica (especially Guatemala and Mexico) and the Andean countries. Long concentrated in rural communities that provided the basis for maintaining separate ethnic identities, these groups by the mid-twentieth century had joined migration streams toward the cities. Indigenous ethnicity has proven remarkably resilient. In many cases urban migrants have maintained community-based identities through the social networks that led them to settle in the same neighborhoods as their family and friends.

The relationship between class and ethnicity has been no less complex. In the Caribbean the demise of the plantation system, with its sharply defined racial hierarchy, has produced varied outcomes. On the smaller islands, where white elites never constituted more than a tiny minority, blacks and mulat-toes have acquired greater political and economic status. In the larger countries, such as Cuba or the Dominican Republic, where the white population was considerably more substantial, racial stratification has been more persistent. In general the evolution of social and political movements based on racial awareness has been marked more by selective strategies than by polarization on the U.S. model. Movements centered on black self-awareness, for instance, have focused at various times on achieving national independence, resisting U.S. interventions, or opposing transnational corporations, but rarely on opposition to whites in general. In other instances, once-racial distinctions have come to be expressed more in ethnic terms, as with black and mulatto populations in Haiti or black and Asian Indian groups in Trinidad and Guyana.

Brazil offers yet another pattern. There the discriminatory heritage of slave plantations was reinforced until the mid-twentieth century by the spatial concentration of blacks in the economically depressed Northeast, whereas the white population (enlarged by European migration) inhabited the more prosperous South. Despite increasing black migration from the Northeast to the South, however, racial inequality has not lessened. During the "economic miracle" of the 1970s, despite general gains for Brazilian workers, the black and mulatto populations remained concentrated in the most disadvantaged educational categories and occupations. One result has been, since the late 1980s, the rise of social movements and organizations articulating a distinct Afro-Brazilian identity.

CONSOLIDATION OF HETEROGENEITY IN CLASS STRUCTURES

The Latin American class structure of the early twenty-first century is more heterogeneous than that of the 1950s–1980s period. Data from ECLAC, the International Labour Organization (ILO), and the United Nations Development Program (UNDP) demonstrate certain trends. In the first place, poverty, informality, and social exclusion have become a massive urban phenomenon. Data from 1990 to the early 2000s show a consistent proportion of urban income poor in Latin America of more than one-third of the total urban population, with a tendency to increase after 2000. With the urban population still growing (and at a significantly faster rate than the rural population) during the 1990s, the absolute number of urban poor increased. In 2002 roughly 144 million (or 65 percent) out of the total 221 million of income poor in Latin America lived in cities and towns. Fifty million people lived in extreme poverty (indigencia). Of the total Latin American population 75 percent lived in cities and a significant segment of them in megacities and metropolitan conglomerates. This development is reflected in high persistent inequality in the distribution of urban income and wealth, in the expansion of slums, and the deterioration of popular neighborhoods since the 1980s.

A second characteristic of the class structure is the implicit duality of the formal and informal economy and society. Originally interpreted as a short-term under- and unemployment phenomenon, employment in the informal economy appears in the early twenty-first century to be consolidated, and the informal economy thus shapes a kind of informal society, partially inserted in the formal order and partially forming a parallel social structure with its internal social hierarchies. Ethnicity is a stratifying factor within the informal economy and society. Mechanisms for survival predominate: ties of ethnicity, religion, real or symbolic family relationships, closeness to the place of birth, local neighborhood relations. In the Andean countries, Central America, and Mexico, features of Quechua or Maya culture mix with elements of informal society. In Table 1 one can observe the over-time consolidation of the formal-cum-informal order.

This heterogeneous class structure reflects the growing pattern of segregation, restriction, poverty, and de facto second-class citizenship in the second half of the twentieth century. It reflects the precarious implantation of (urban) second-class citizenship as the long-term result of the mainstream model of economic crisis and reforms in the 1980s and 1990s. The resulting class structure is related to an intergenerational process of informalization and social exclusion in the urban—more precisely the metropolitan—environments, nourished by a continuous migration stream from the rural hinterland of the countries of Latin America and the larger island states of the Caribbean. Latin America has thus become the continent where, in most of its countries, a significant segment of the population is at once poor, informal, and excluded.

There are some marked changes within the Latin American urban class structures. The chronically poor are now joined by the "new poor," descending from the former strata of the middle and industrial working classes. Old and new poor converge as informal micro-entrepreneurs and self-employed in search of survival and livelihood strategies. The decomposition of the formerly substantive working classes has not only led to the formation of a new edifice of social stratification but also to changes in the size and composition of poor households' family structures. The traditional role of men as heads of families is ebbing away with the enlarged number of female-headed households in the popular neighborhoods and slum cities. Furthermore, the informal economy and society even generates hidden migration cycles, demographic breakdowns, and cleavages within the family structure.

Central America, with its poverty-stricken and war-torn societies, may provide the best example of disruption at the family level. The displacement process of war refugees fleeing violence followed by even more substantial migration in peacetime to the United States and Mexico is in fact a population exodus migration to Mexico and the United States. Their remittances create other patterns of consequences such as a structurally reduced employment market, high unemployment rates for women and younger people, broken families and the despair of the family at home after the "temporary" migration of the male members, and the bitter choice between self-employment and emigration.

This overflow of poverty and exclusion bursting its banks and generating the new basin of informality and second-class citizenship has been portrayed as the desborde popular. It has the potential to trigger the decline of the institutional pillars of traditional formal society, overwhelmed by the growth of Latin America's slums and its consequences in terms of the emergence of a qualitatively new (urban) society. It prompted the birth of a diversity of organizations representing the informal entrepreneurs and self-employed, such as local and regional chambers of craftsmen and community-run food canteens in the slum cities. What all of these have in common is an ambivalent relationship of dependency on the professional development organizations that finance them, such as religious and ecclesiastical foundations, NGOs, donor agencies, private banks "with a social face," and municipal and central government organizations.

This process also started the collapse of the traditional support institutions of the democratic order: the decline of political parties, the erosion of the status of the legislature and the judiciary, the dwindling stature of the magistrates as the legitimate authorities in the sphere of law and order, the collapse of the once-powerful trade union confederations, and the weakening of other conventional entities of civil society, such as the chambers of industry and commerce and the professional organizations of doctors, lawyers, and engineers. The parallel institutions, parallel hierarchies, and parallel sectors that have emerged along the lines of poverty, informality, and social exclusion may well have formed a more durable—albeit heterogeneous—economic, social, political, and cultural order.

The newly emerging class structure also has consequences with respect to the political order. It is interesting to notice that between 1997 and 2007 all Latin America's nonelectoral government changes were instigated not by military coup but by social movements of the poor—the slum dwellers, the urban informales, the ethnic movement in the urban informal society—that have mainly taken the form of ad hoc popular protest movements, mass meetings, regional protest alliances, sit-down meetings, and hunger marches. Several substitutions of presidential regimes—in Argentina (four in 2001), Bolivia (two in two years: 2003 and 2005), Ecuador (eight between 1997 and 2007) and in Peru with the fall of Alberto Fujimori (2000)—were the result of this new democracia de la calle. Latin America's complex class structure is producing substantive changes in the region's social and political landscape.

See alsoMigration and Migrations; African Brazilians: Color Terminology; Brazil: Economic Miracle (1968–1974); Economic Development; Maquiladoras; Slavery: Brazil; Slavery: Spanish America.

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                                           Dirk Kruijt