HomeInternationalLatin America - SpecialCollapsing birth rates in Latin America – Challenges and Possibilities

Collapsing birth rates in Latin America – Challenges and Possibilities

By: Julius Jönson

When we think about the challenges of an aging and shrinking population, we usually think of European or East Asian countries. While these regions have experienced the most advanced stages of this trend, an increasing number of countries worldwide now have rapidly aging populations. One such region is Latin America, where decades of fast population growth is now coming to an end, bringing about both challenges and opportunities.

What’s happening?

Between 1950 and 2000, Latin America’s population more than tripled. As economic standards improved and child mortality rates fell, birth rates declined, a phenomenon known as the demographic transition that occurs as countries develop. The surprising aspect of this change in Latin America is the rapid pace of it. Fifty years ago, the average number of children per woman in Latin America was 4 to 5, but today, a clear majority of countries have birth rates below the replacement level of 2.1 children per woman.

The decline has not plateaued but continues to fall rapidly. In Argentina, Chile, and Uruguay, the number of births has almost halved in the last ten years, making Uruguay the first Latin American country to experience a natural population decline since 2021. Several countries of the region, such as Chile, Uruguay, Costa Rica, Cuba, and Jamaica, now have birth rates below 1.3 children per woman – the threshold for ultra-low fertility rates.

The dynamics of falling birth rates

In the short term, there’s no major cause for concern. Falling birth rates will only mean lower costs for schools and preschools as the number of children decreases. It’s also uncertain whether these low birth rates are permanent or if they reflect women gaining better control of their reproductive health. In such a scenario, birth rates could rebound.

However, persistently low birth rates lead to different challenges. If the birth rate remains below the replacement rate for an extended period (as is usually the case) the age structure of the population will shift towards a shrinking workforce and a rapidly growing old population. 

The relationship between working and nonworking people – such as children and retirees – is measured by the age dependency ratio. Here is where the challenges come into play.

Challenges

An increasing age dependency ratio means that a growing retired population will have to be supported by a shrinking workforce. This creates all kinds of challenges, the first of which is usually increased pressure on the pension system, prompting cuts to the system to prevent it from running out of money. Such changes have recently been introduced in Uruguay and Brazil

A decreasing working-age population also makes it harder for companies to recruit, leading to labour shortages. Meanwhile, healthcare will need to absorb an increasingly larger share of the workforce as an older population requires more care.

Here lies the biggest issue: to avoid the adverse effects of a shrinking workforce, productivity needs to increase in order to do more with less. This is a big challenge for the region. Latin American economies are used to a rapidly growing workforce. New people entering the labour market accounted for around 75% of economic growth in the region between 2000-2019. In China, which also has an aging population, almost all growth was the result of productivity gains, decoupling the size of the workforce from economic activity. 

In several Latin American countries, the size of the labour force has now flatlined and will start decreasing in the not-too-distant future. If a different model for economic growth is not identified, the economies of the region could grind to a halt. 

The picture is not all gloomy, however, as declining birth rates also offer several positive effects. 

Opportunities

Firstly, it is a given positive that women gain more control of their reproductive health and that fewer children are born into bad conditions. There are also several societal benefits of decreasing birth rates. 

Many Latin American countries are now enjoying a demographic dividend – meaning that the country’s age structure is favorable for growth and development. 

If birth rates fall from a high to a low level relatively fast, there will be 20-30 years or so when people of working age make up a disproportionate amount of the population while the expenses for children and elderly are relatively low. It is during this phase, that the dramatic economic growth of countries such as Japan, China, and South Korea has occurred. 

It must however be mentioned that this is more of an amplifying effect rather than a given positive. Brazil now enjoys some of the best demographic structures in the world, with few children and few elderly. An economic explosion such as the one in China has however failed to materialize, and the country’s age-dependency ratio has now started creeping upwards. Countries must seize the opportunity to grow before this demographic moment of opportunity passes. 

A good example is Mexico – whose labour force will continue to grow until the 2040s – which has presented itself as a center for manufacturing when producing in China has become both expensive and fraught with security concerns. As more jobs move into Mexico, income from this economic activity could help expand the economy and help the country grow rich before it grows old. 

The end of the demographic road

What’s clear is that the era of Latin America as a young continent with an endless supply of new labor is over. While countries like Brazil, Uruguay, and Costa Rica are still significantly younger than Spain, Italy, and Japan, they are also much poorer and less economically productive. This is important to note since the effects of a shrinking workforce can be offset by new technology and automation, but this requires a level of economic development that no Latin American nation has yet achieved. In other words, the region has less of a margin of error to handle the challenges of shifting age structures. 

Infrastructure has to be built and innovation strengthened if the region is to decouple economic activity from the size of its workforce. 

If these countries play their cards right, decades of stability and growth could be at the doorstep. If not, an opportunity that will not come again could be squandered while the population grows older and older. As the region is massive, incredibly diverse, and at different stages of the demographic transition, we are likely to see both positive and negative examples. The only thing we can say for certain is that Latin America is now heading into unknown territory. 

Picture: Unsplash / Roberto Huczek

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Julius Jönson
My name is Julius Jönson, currently studying for my master's in international politics. I have written for student magazines before, and this year I am excited to join DEBAT as both a writer and an editor. My biggest interest is the intersection of demographic change and international politics, so many of my articles will likely have this focus.
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