When Gabriel García Márquez was working on one of his most iconic stories, “No One to Writes to the Colonel,” it was 1960, and in Colombia, each woman had an average of nearly seven children. He himself had 11 siblings, which was not unusual in his hometown of Aracataca. Twenty years later, he could have titled his work “Chronicle of an Announced Aging,” because the fertility rate had already dropped below 4 children per women, and by 2022, the country’s population decreased for the first time in its recent history, standing at 1.69 children per woman. Between January and October 2024, the birthrate in the country decreased again by 14.4% compared to the same period the previous year, marking the lowest figure in the last decade, according to the National Department of Statistics.
The case of Colombia illustrates what is happening in Latin America and the Caribbean (LAC) with the tide of demographic change: aging is accelerating, and its progress will bring about profound social and economic transformations soon, especially in three areas: pension systems, health, and care. This makes it urgent to act so that our region faces the future with the necessary reforms to guarantee the well-being not only of those over 65 but of the entire population.
How to respond to the aging population and declining birthrate was the topic of a recent webinar featuring Ana María Ibáñez, Vice President of Sectors and Knowledge at the IDB; Marc Canal, Associate at McKinsey Global Institute; and Irene Arias, CEO of IDB Lab, who shared their vision of this reality and how to face it.
How do we help seize the opportunities of aging at the IDB?
The issue of aging is not new for the IDB. We have been promoting the silver economy for years, working with governments in the region to develop policies that help minimize the consequences of demographic change and generating knowledge products that place this reality on the public agenda. The goal has been to raise awareness of an emerging problem and to capitalize on the opportunities that population changes may bring for economic and social growth in the region.
According to data shared by Ibáñez during the seminar, from a public policy perspective, the IDB helps countries in their pension system reform processes. On average, 69% of people over 65 in Latin American Caribbean have a pension, but the coverage is highly uneven: while in Costa Rica, it is 73% and in Uruguay it reaches 91%, in Honduras, El Salvador, or Guatemala, it does not exceed 20%. Moreover, the replacement rate—i.e., the percentage of the pension that retirees receive compared to what their salary was—barely exceeds an average of 40%, with extremes as low as 18% in Bolivia or as high as 64% in El Salvador.
Regarding health systems, 80% of the population in LAC has access to health services, but the quality of these services is low due to a lack of preparation among healthcare professionals, inadequate facilities, and poor management of chronic diseases. Prevention, early detection, and treatment of chronic diseases are the pillars that help increase life expectancy with good health after 65, and we cannot ignore that aging brings an increase in health expenses: by 2050, these expenses are expected to rise by 175%, which poses significant challenges for fiscal sustainability.
However, the area of care may be the one we need to work on the most. Around 8 million people over 65 in our region need help with some of the basic functions of daily life. However, many of our countries barely cover 5% of their elderly population, and the quality of care is inadequate due to poorly trained caregivers (8 out of 10 caregivers have no formal training), precarious and unsafe working conditions (70% of paid caregivers earn the minimum wage or less), or the high informality in the sector (only 1 in 4 caregivers contributes to social security), according to a survey conducted by the IDB in 2024.
In this context, public policies play a major role, and the IDB can help countries with this demographic transition by designing adequate public policies or strengthening the institutions that provide these services. Public policies, together with the technical assistance of the IDB, can support the formulation of new legislation, regulatory frameworks (including quality standards), and the capacity of the public sector to act as a direct provider, as well as a strategic purchaser of services provided by the private sector, for profit or not.
Public financing directed at assisting those who need care and the most vulnerable eligible caregivers can really shape a market for services provided by the private sector that meets high-quality standards. The IDB’s support is also relevant in generating knowledge products to design public policies that allow countries to address these challenges and alert them to take action.
Latin America and the Caribbean must get rich before it gets old
The region is less than a generation away from having the same population structure as today’s developed economies, according to Marc Canal, but the region’s per capita income is 50% of that of the advanced economies. To generate at least the same amount of resources, LAC will need to double its per capita income, so our region “must get rich before it grows old,” said the McKinsey associate. Addressing this situation and generating growth requires creating more and better jobs and, secondly, making every job more productive. For all of this, much higher levels of investment are needed.
A more productive longevity or the presence of workers for a longer time in the labor market can increase employment; also, greater female participation in the workforce, which in LAC averages 65%, compared to 80% in advanced economies, opens up significant opportunities. Companies can support greater labor participation at all ages, particularly among older people, with training and professional retraining, cross-mentoring between older and younger people, and innovation in areas for productive longevity across all sectors. With measures in this direction, we can achieve a silver economy that is much more consumer-oriented, he concluded.
The silver economy is not a distant reality that will happen in a few years. The demographic tide is rising slowly but steadily. In our region, the waves of aging are just reaching our knees, but we know they will continue to advance. A focus on pensions, health, and care will allow us to stay afloat in the tide of demographic change in a way that is satisfactory for our societies.
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