By John C. Edmunds
April 16, 2015
When most corporate leaders and entrepreneurs think about Latin America, they assume that the region is still in a Malthusian dilemma: They picture widening rings of shantytowns surrounding the big cities, filled with hordes of illiterate, unemployed laborers needing handouts.
Half a century ago, all schoolchildren learned that the world’s population was growing rapidly and that Latin America’s was growing even faster. That characterization has cast a pall over the region’s prospects—and has distorted business investment decisions.
In advance of Babson’s Latin American summit in Cartagena, Colombia, from April 24 to 26, let us recall that statistics can mask the true patterns, especially if they are out of date.
In fact, the correct new mental construct for businesspeople is to think of Latin America’s population projections as not all that different from Sweden’s—a finding with profound implications. Accurate and up-to-date figures confirm this.
Indeed, the United Nations Population Research Bureau estimates for 2014 showed striking slowing of population growth for the region. The U.N. also developed forecasts of the population of each country for 2025 and 2050. Those predictions have been revised downward also, but perhaps not enough.
First, let’s look at the slowdown that’s already occurred in some representative nations:
- In Brazil, the number of girls aged zero to six was 6.96 percent of the total population in 1990, 5.45 percent in 2005, and 4.34 percent in 2014.
- In Mexico, the number of girls aged zero to six was 7.84 percent, 6.23 percent, and 5.47 percent of the total population in 1990, 2005, and 2014, respectively.
- In other countries in Latin America and the Caribbean region, similar trends are in progress, though in some of the poorer countries, such as Guatemala, the demographic transition is less advanced.
To compare Brazil and Argentina with a country that has had—and enjoys a reputation for—very low population growth for many decades, consider that in Sweden the numbers were 3.11 percent, 3.10 percent, and 3.46 percent in 2000, 2005, and 2014. The figure for the last year is just a little over a percentage point below Brazil’s.
If one wonders whether the declining births are an aberration, current projections are that in 2020, girls aged zero to six will be 3.97 percent of Brazil’s population and 5.11 percent of Mexico’s. For 2025, the projected percentages are 3.78 percent in Brazil and 4.79 percent in Mexico.
These numbers reveal how far the Latin American demographic decline has progressed and show that demographers expect the decline to continue into the future. It’s also worth noting that in recent years, demographers have frequently overestimated population growth. So if the forecasts are incorrect, it will probably be because they were too high.
U.N. figures further show that even with slower economic growth, income per capita continues to grow, because GDP growth has exceeded population growth for many years. To be precise, during the “lost half decade” from 1998 to 2002, GDP per capita for Latin America and the Caribbean declined from $4,186 in 1998 to $3,614 in 2002; but from 2010 to 2013, GDP per capita rose from $7,652 to $9,314. So although economic growth has been slower, the population has been growing even more slowly.
People in business can draw numerous conclusions from these figures. Most obviously, per-capita consumer spending will continue to grow, even if economic growth remains sluggish. Meantime, expenditures on each child will increase, because there are fewer of them.
One significant inference for retailers is that switching to selling expensive toys, for example, will generate more profits than selling diapers to the dwindling baby population. And while toys might seem frivolous and objectionable when many children lack adequate nutrition, other evidence indicates that the number of children suffering deprivation is declining due to antipoverty programs. For the mass market, opportunities beckon in selling high-rotation articles of routine daily use, such as toothpaste and snack foods, in attractive packaging with pricing calibrated to the pocketbooks of the strata that have recently emerged from poverty.
As these population and economic trends take hold, the distribution of income will continue to be at the forefront of political debate. Yet to be resolved is how to transmit the benefits of economic growth to the lower strata of the income distribution. However, this will be easier to accomplish with fewer children born each year.
The conventional and dark assumption has been that every year millions more children need education, health care, food, clothing, and housing. Those needs still exist, but the problem is becoming more tractable, even as the business climate becomes more attractive for investment and development.
All of which is good news, and the numbers prove it.