Building the BRICs - Brazil in focus
by Riordan Roett
26 April 2011
Brazil, Russia, India and China are emerging as the new world powers - but they face their own unique challenges, writes Riordan Roett
Demography has become an increasingly important area of research given the emergence of the BRICS – or Brazil, Russia, India, China and, now, South Africa - coming to the fore in international affairs.
Combined, they occupy more than 25 per cent of the world's land coverage and more than 40 per cent of the world's population. As the population of these countries grows older, important questions have been raised regarding social welfare policies and the differing demands for the world's resources in the five countries. It is often said that China may grow old before it can become rich, given the rapidly aging population.
Russia's demographic profile is perilous - the population is dying young and shrinking, and any replacement population would come from ethnic and religious groups that are not accepted by those who consider themselves the "true" Russian people. India, with the world's second largest population, needs to address inadequate educational facilities and health care policies for a rapidly expanding, relatively young population.
Brazil is an interesting case study. It is in the middle of a profound socioeconomic transformation, driven by changing demographics. The country is now in the so-called "demographic bonus" - a time period in the nation's transition when the proportion of the population in the working age group is high. The ratio of dependents to the working-age population is favorable - but that dependency ratio, declining since 1965, will bottom out in 2020 and will then increase.
Mortality started declining, mostly at young ages, around 1940. Life expectancy at birth increased from about 50 to 73 years between 1950 and 2010. The change in fertility is even more dramatic. The average Brazilian woman had more than six children in the early 1960s and currently has less than two. Over time these changes in mortality and fertility profoundly alter the population age structure.
The elderly population will increase from about 11 per cent of the working-age population in 2005, to 49 per cent by 2050, while the school-age population will decline from about 50 per cent of the working-age population in 2005 - to 29 per cent by 2050. These significant shifts in population age structure will lead to substantial additional fiscal pressures on publicly financed health care systems, pensions, and education.
Per capita public transfers to the elderly relative to the children in Brazil are much larger than in any OECD or other Latin American country with similar welfare systems. Brazil's public sector spending in education and pensions as a percentage of GDP is similar to Organisation for Economic Co-operation and Development countries. But, given Brazil's much younger population age structure, this results in markedly lower public education investment in youth - 9.8 per cent of average wages in Brazil versus 15.5 per cent in OECD countries and markedly higher average public pension benefits; 66.5 per cent of the average wage in Brazil versus 30.4 per cent of average wage in OECD countries.
Aggregate public health care expenditures in Brazil are much below the OECD average and average health benefits are somewhat lower. The challenge for Brazilian policy makers is to increase per student investment to OECD levels now without adding much burden on public finance. It would require an increase in education spending of little more than 1 per cent of GDP by 2020.
Health care is likely to be a major fiscal challenge in the coming decades because of the increasing proportion of elderly in the population and a growing intensity of formal health care use among the elderly. Policy makers will need to carefully assess the structure of the country's pension system and to take adequate measures to prepare for the sharp increase in the elderly who will require long-term care and are not currently covered by the highly concentrated system of retirement that favours public sector workers and ignores those who work in the informal sector of the economy.
All of the BRICS will face different demographic challenges. But falling fertility and increasing mortality are general characteristics of all five countries. Each government needs to assess current practices and start the adjustment needed to deal with different demographic dynamics by 2050. These are not easy decisions. They will need to include resource transfers and new revenue streams to meet the challenge. While there is time in Brazil, India, and South Africa - the window is closing in China and Russia.
Riordan Roett works out of the School of Advanced International Studies at Johns Hopkins University, in the US
Demography has become an increasingly important area of research given the emergence of the BRICS – or Brazil, Russia, India, China and, now, South Africa - coming to the fore in international affairs.
Combined, they occupy more than 25 per cent of the world's land coverage and more than 40 per cent of the world's population. As the population of these countries grows older, important questions have been raised regarding social welfare policies and the differing demands for the world's resources in the five countries. It is often said that China may grow old before it can become rich, given the rapidly aging population.
Russia's demographic profile is perilous - the population is dying young and shrinking, and any replacement population would come from ethnic and religious groups that are not accepted by those who consider themselves the "true" Russian people. India, with the world's second largest population, needs to address inadequate educational facilities and health care policies for a rapidly expanding, relatively young population.
Brazil is an interesting case study. It is in the middle of a profound socioeconomic transformation, driven by changing demographics. The country is now in the so-called "demographic bonus" - a time period in the nation's transition when the proportion of the population in the working age group is high. The ratio of dependents to the working-age population is favorable - but that dependency ratio, declining since 1965, will bottom out in 2020 and will then increase.
Mortality started declining, mostly at young ages, around 1940. Life expectancy at birth increased from about 50 to 73 years between 1950 and 2010. The change in fertility is even more dramatic. The average Brazilian woman had more than six children in the early 1960s and currently has less than two. Over time these changes in mortality and fertility profoundly alter the population age structure.
The elderly population will increase from about 11 per cent of the working-age population in 2005, to 49 per cent by 2050, while the school-age population will decline from about 50 per cent of the working-age population in 2005 - to 29 per cent by 2050. These significant shifts in population age structure will lead to substantial additional fiscal pressures on publicly financed health care systems, pensions, and education.
Per capita public transfers to the elderly relative to the children in Brazil are much larger than in any OECD or other Latin American country with similar welfare systems. Brazil's public sector spending in education and pensions as a percentage of GDP is similar to Organisation for Economic Co-operation and Development countries. But, given Brazil's much younger population age structure, this results in markedly lower public education investment in youth - 9.8 per cent of average wages in Brazil versus 15.5 per cent in OECD countries and markedly higher average public pension benefits; 66.5 per cent of the average wage in Brazil versus 30.4 per cent of average wage in OECD countries.
Aggregate public health care expenditures in Brazil are much below the OECD average and average health benefits are somewhat lower. The challenge for Brazilian policy makers is to increase per student investment to OECD levels now without adding much burden on public finance. It would require an increase in education spending of little more than 1 per cent of GDP by 2020.
Health care is likely to be a major fiscal challenge in the coming decades because of the increasing proportion of elderly in the population and a growing intensity of formal health care use among the elderly. Policy makers will need to carefully assess the structure of the country's pension system and to take adequate measures to prepare for the sharp increase in the elderly who will require long-term care and are not currently covered by the highly concentrated system of retirement that favours public sector workers and ignores those who work in the informal sector of the economy.
All of the BRICS will face different demographic challenges. But falling fertility and increasing mortality are general characteristics of all five countries. Each government needs to assess current practices and start the adjustment needed to deal with different demographic dynamics by 2050. These are not easy decisions. They will need to include resource transfers and new revenue streams to meet the challenge. While there is time in Brazil, India, and South Africa - the window is closing in China and Russia.
Riordan Roett works out of the School of Advanced International Studies at Johns Hopkins University, in the US
COMMENTS
One thing - in India, the "fertility rates" or basically the birth rates are increasing and the death rates have fallen drastically due to the improving health care facilities. You cant just say: "But falling fertility and increasing mortality are general characteristics of all five countries." Because it isn't so.
Mini - London, UK.
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