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  • Demographics: Birth rate fall and prospect of longer life cloud Mexico’s future

    Autor: Adam Thomson Financial Times | Medio: Financial Times

    Raúl Velasco remembers the time when Mexican families were big. “There was never any question that you would have seven, eight, maybe even 10 children,” says the retired construction worker from Mexico City. “That was what our parents did and that is what we imagined our children would do, too.”

    Mr Velasco’s seven children – three boys and four girls, all born in the 1960s and 1970s, and all now with families of their own – broke with the country’s age-old tradition. Between them, they only have 11 children and Mr Velasco says they do not plan to have any more.

    The dramatic demographic shift in Mr Velasco’s family mirrors almost exactly the wider trends at work in Mexico over the past 50 years or so. From an average of almost seven children per woman in the 1960s, the birth rate has fallen to roughly two today.

    Those changes have created both opportunities and problems for the world’s 11th largest country by population as it grapples with the strains of trying to become a fully developed nation over the next generation.

    For a start, it still has a predominantly young population. According to official figures, half the country’s 112m inhabitants are below the age of 29, a fact that has left Mexico with an abundance of cheap and relatively skilled labour.

    That demographic boon has given Mexico a huge advantage over many of its competitors. In China, for example, wages in the manufacturing sector, where it competes openly with Mexico, have increased by about 20 per cent a year on average between 2003 and 2011 in US dollars.

    In Mexico, by contrast, wages have remained more or less flat over the same period, thanks in large part to the country’s plentiful source of young people entering the labour force. As Luis de la Calle, an economist in Mexico City, says: “Right now, you have to look at Mexico and conclude that it has the best demographics in the world.”

    Yet, for the generation born on the eve of Mexico’s decline in the birth rate, things are not quite as upbeat. Unlike their parents, they face the prospect of growing old without large numbers of children to support them into retirement. At the same time, these Mexicans generally have to pay considerably more for their children, who are growing up in predominantly urban, and therefore much more expensive, environments.

    “Wealth in Mexico generally used to flow from children to their parents,” says Carlos Welti, a demographics expert at Mexico City’s National Autonomous university (Unam). “For today’s middle-aged parents, it is flowing in the opposite direction.”

    Moreover, Mexico’s class of 1960-something face the unenviable prospect of having to look after their parents for longer, because Mexicans are not only having fewer children but also are living to an advanced age.

    According to Mr Welti, almost 25 per cent of the population will be aged 75 and above within 30 years compared with just 10 per cent today.

    Things do not stop there. For decades, the Mexican state directed its scarce resources to the young and growing population via healthcare for mothers and babies – a policy that made sense as long as the population was young. But Latin America’s second-largest economy is growing older and it is doing so without a universal social security system.

    Manuel Molano, of Mexico City’s Mexican institute for competitiveness says that turning things around is one of the country’s biggest problems, not least because an estimated 60 per cent of the roughly 50m population of working age do not pay taxes and so either have underfunded retirement plans or no plan at all.

    “We have between 20 and 40 years to change our model,” says Mr Molano. “If in that time we have not reformed our economy radically, those people will grow old poor.”

    The new centrist administration of President Enrique Peña Nieto is aware of the problem. On December 2 last year, a day after taking office, it announced a potentially far-reaching agreement consisting of 95 reform proposals covering almost every aspect of political, social and economic life.

    Among other things, the agreement, which also carried the signatures of Mexico’s opposition leaders, proposes to establish a comprehensive safety net spreading from healthcare to pensions for all Mexicans “independent of their social circumstances or labour situation”. The government’s idea is to make payments into individual accounts for every Mexican turning 18 and until they reach 65, and to use that money to cover their retirement needs.

    There is no doubt that it is an ambitious plan – and one that will require a substantially higher tax take than the roughly 10 per cent of gross domestic product that the government currently receives in non-oil revenue. However, for experts such as Mr Molano, it is an essential one.

    He says: “Our demographic profile has given us a window. We have to take advantage of it.”

     

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