In the coming years, the Latin American region will experience a significant population change. The relevance of the demographic transition in Latin America goes hand in hand with the drop in the fertility rate and life expectancy. Experts seek to prevent the possible negative impacts of these problems to find the effective solution, while looking for productive ways to take advantage of the positive aspects that this phenomenon has for the economic model. The transition should not be seen as something negative because it is the natural course of life, it is something inevitable. It is the same phenomenon that was experienced in Europe and Japan. Now our time has come.
The trend is that we have fewer and fewer children and more and more years of life. We have gone from having 5 children per woman since 1970, to 2 by 2021. To this, we must add the increase in life expectancy. We go from 59-60 years to 75 today. Since 1970, the population density of Latin America increased by 128% until 2020. It is estimated that in the next 4 decades the increase will be 17% and for the year 2100 it will be -11%. A clearly descending trend.
The heterogeneity in which the continent is found can be observed, although there is a convergence towards a similar demographic regime for all. A clear example of this are Cuba and Guatemala, which are further behind in the process than each other. Currently in Cuba, the 65-year-old population exceeds the population under 14 years of age. In Guatemala, it is estimated that this phenomenon will occur within 50 years.
The age structure is changing. We will stop being a young society to be an adult population and then an aging population by the year 2053. Productivity and employment would be affected, due to changes in age structures, in a direct negative transition. People without income who must consume goods. This will have a strong impact in economic terms, mostly on the per capita GDP of nations. On the other hand, it could have a positive impact on women and its participation in the labor market. If the fertility rate falls, there will be fewer children per woman as well as more capacity and economic resources to invest in individual capital, depending on the economic context.
There are significant challenges in health systems. Among them, the accumulated inequalities in Latin America, of people who arrive with almost zero savings and with serious health problems due to the very poor working conditions of societies. Women with very low levels of savings, who do not have any economical support as a result of family changes. Due to labor informality and the lack of precaution of social protection mechanisms in Latin America, we run the risk of aging in conditions of strong poverty. Latin America and the Caribbean are regions in which the majority of the population does not receive any type of old-age pension and those who are lucky enough to receive it, generally manage it in a scenario of poverty.
The solution is to structure an adequate action, based on planning for the sustainable development of the economies of the region. In other words, an economic restructuring based on demographic conditions, through sustained drive for innovation and adaptation to technological change, along with improvements in job conditions. We must invest in education and educational systems to increase quality labor participation. This means investing in younger populations to make them more effective and productive, resulting in an optimal contribution to the states’ economic schemes.
Another side of the problem is the need to invest in health systems to care for the elderly, both in public and private institutions, including planning and improving old-age pensions. If this does not improve, it will have a very negative impact on social inequality and on the projection and quality of life of older adults. Governments should plan for the long term, taking into account the impact of Covid19 and future pandemics. Public social spending would increase, but there would be a transfer of expenses that are currently used for the younger population, such as education. A restructuring based on population change could generate an optimal scenario for the elderly population, both in terms of health and production and labor benefits. In other words, they work longer and more efficiently, contributing positively to economic growth. An example of this change in format is the increase in the minimum retirement age, pension funds and the tax distribution.
Being the first time that Latin America has a demographic transition similar to the one described here, a complex situation is announced. However, in the same way that there are obstacles in the development of the region, this also brings with it a great investment opportunity for those entrepreneurs with a long-term vision. Developing new businesses in the sectors of finance, health, care for the elderly, housing, transport, education, entertainment, digitization and different sectors that have not yet begun to develop. It is time to adapt and make the most of this particular situation.
UNFPA en Uruguay, UNFPA. “Desafíos y Oportunidades del Envejecimiento Poblacional en América Latina y el Caribe.” YouTube, 24 June 2021, www.youtube.com/watch?v=uyuiOfnZ-bQ.