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Brazil's Demographic Headwinds: Too Few Young People and Too Many Retirees

Latin America's demographic woes are caused by high rates of young people immigrating to wealthy countries seeking economic advantages, and a declining birth rate. Brazil, a country with historically impressive birthrates and population growth trends is expected to "shrink" by five million this year and growth rate trends are the lowest the country has seen since 1872.

Latin America’s fertility rate has plummeted in recent decades, dropping below replacement levels in most countries. This translates to a smaller workforce supporting a larger retiree population, putting pressure on social safety nets and potentially dampening economic dynamism.

  • Between 2013 and 2022, births fell between 10 percent and 34 percent in eight Latin American and Caribbean countries that account for two-thirds of the region’s total population.

  • As of 2024, there will be roughly 30 percent fewer 4-year-olds entering Argentine preschools than there were in 2020.

  • Uruguay, Costa Rica, Chile, Jamaica, and Cuba now have total fertility rates of around 1.3 children per woman—the so-called “ultra-low fertility” threshold that has only been seen in a handful of European and East Asian countries.

The demographic shift occurring in Latin America is already impacting real estate markets across the region. With fewer young adults forming families and buying starter homes, the demand for traditional single-family dwellings is expected to soften. Demand for offices will stagnate or fall back due to fewer workers and need of professional services. As societies age they shop and save less, young people starting families spend the most and provide the investment capital required to grow. As societies age their investments derisk, spending plummets, and often the elderly person is a net drain on society from a financial point of view. The impact on retail investments is therefore obvious.

One real estate sector that could do well is senior housing and medical facilities. Traditionally, Latin American markets have shunned this service choosing instead to care for their elderly family members themselves. As those young people flee to wealthier nations, and since fewer children are being born, the sector should be one of the few real sectors benefiting from the negative population trends.

Brazil’s Looming Demographic Crisis: A Case Study

Brazil, Latin America’s largest nation, stands as a stark example of the region’s demographic challenges. In 2023, the country’s population shrank by nearly 5 million people, marking the first annual decline since records began. The official census, released in June 2023, revealed a population of 203 million in 2022, up only 6.5 percent from 2010 and falling short of projections. This translates to an annual growth rate of just 0.52%, marking a dramatic slowdown from the 1.17 percent in 2010 and the lowest since records began in 1872. This dramatic reversal comes after decades of rapid population growth, fueled by a combination of relatively high fertility rates and rural-to-urban migration.

Brazil faces social security strain. With a shrinking workforce supporting a growing retiree population, Brazil’s social security system is facing increasing pressure. The government may need to raise taxes or cut benefits to keep the system afloat which has a further negative impact on the economy putting less money in the hands of young people contemplating a family.

While Brazil remains the world's seventh most populous nation, its growth appears to be reaching a turning point, with implications for everything from social security systems to regional development. The economic powerhouse of the southeast remains the most populated region, while the vast agricultural center-west holds the smallest share of the population. 




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