BRAZIL: Rapid Ageing of Population Paves Way for Social Chaos

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 23 2002 (IPS) - The elderly portion of the Brazilian population is expanding rapidly, which bodes for social chaos in the near future, considering that the social security system is already suffering a serious deficit.

The 2000 census indicates that 8.6 percent of the 170 million Brazilians are older than 60, a portion much lower than in the countries of Western Europe and Japan, where the average is above 20 percent.

However, the growth of this sector of the Brazilian population is double that of industrialised countries and is expected – in less than 40 years – to reach 16 percent, the current average in the United States, a country that took more than 70 years to reach that level.

This process could serve as the basis for potential tragedy in developing countries, according to the United Nations-sponsored World Assembly on Ageing, which met earlier this month in Madrid.

The population changes in the developing South are occurring more quickly than in the industrialised North, and are aggravating the existing economic and social problems.

The outlook looms even darker because in the weakest economies the expenditures on the elderly will be proportionately much higher than in stronger economies.

Brazil is already faced with this reality. Social services for the population over 60 requires nine percent of the gross domestic product (GDP), while the wealthy countries of the Organisation for Economic Cooperation and Development spend an average of 7.4 percent of GDP for those ends, and the United States just 4.4 percent.

But Brazil’s high expenditures are due to “a confusion between social security and social assistance,” which are the responsibility of a single ministry, economist Raul Velloso, one of the country’s leading experts in public accounts, told IPS.

The Ministry of Social Security and Assistance last year recorded a deficit of 12.8 billion reals (4.45 billion dollars), equivalent to one percent GDP. But that is due in large part to the cost of providing assistance to people who did not contribute to the system, said Velloso.

In Brazil, millions of people have the right to a pension – women upon reaching age 60, men at 65 – without having contributed a portion of their wages to social security. One example is people who worked in the rural sector or in the informal economy.

Social security by itself, excluding social assistance, says Velloso, is running balanced accounts, but that does not calm fears for the future because with Brazil’s current rate of demographic growth, the system should be operating with a surplus.

Birth rates have fallen dramatically in Brazil in the last two decades, reducing the portion of children in the overall population. As a result, the median age of Brazilians rose from 21.7 in the 1991 census to 24.2 in 2000.

The 2000 census also shows a notable majority of people were born in the 1950s through 1970s, marking the country’s population boom.

The economically active population, which official statistics take to include people ages 15 to 64, expanded from 60.45 percent of the Brazilian population in 1991 to 64.55 percent in 2000.

These figures show that there are now fewer dependents – that is, children and the elderly – who are theoretically being cared for by the active population.

These are advantageous conditions that will disappear once the so-called demographic time bomb explodes, when today’s active population turns into dependents and are replaced by the smaller population of today’s children, reversing the situation to disadvantageous conditions.

That threat is still decades away, and Brazil should take advantage of the time to resolve the social security deficit and prepare for a future in which the population consists of more dependents and fewer taxpayers, commented Velloso.

The obstacle standing in the way of achieving that objective is the fact that most Brazilian workers earn their money in the informal economy, are underemployed, or are too poor to contribute to the social security system, said the economist.

Furthermore, he pointed out that social assistance is worsening the problem by stimulating this sort of exclusion and erasing the reasons to contribute to the system.

Expanding the formal economy and reducing unemployment is a big part of the solution, said Velloso, but that requires strong economic growth.

The ageing of the population in itself does not mean economic decadence, according to José Pastore, professor of labour economics at the University of Sao Paulo. Four million of the 14.5 million people over age 60 in Brazil continue to work for wages, he pointed out.

These elderly workers represent a growing sector, one that doubles in size every six years. And together with retirees they create a market for specialised products and services that continues to see its prices decline as demand increases.

As such, the aged cannot be considered “dead weight” for the economy, stated Pastore.

Working people over 60 represent a fifth of the business done by Brazil’s travel and tourism agencies and that portion is increasing, as it is in health, social and education services, generating more employment in those areas.

Pastore cites the example of the United States, which is already trying to attract professionals from abroad to take care of its elderly, given the explosive increase in demand for those services.