Brazil’s Big Challenge: Protecting Its Seniors

Brazil’s Big Challenge: Protecting Its Seniors

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It’s no secret that global finance powerhouses are increasingly devoting money, time and resources to Brazil, one of our largest trading partners in the Southern Hemisphere and a key member of the BRICS coalition. Deutsche Bank’s latest foray – it’s launching a full electronic trading suite there – follows that of others, and it’s a result of Brazil’s middle-class explosion. From home-owning nannies to pricey soccer tickets, evidence abounds that the class structure in Brazil is undergoing a dramatic transformation.

Though there are very real concerns about inflation, Brazil is set to emerge over the next few decades as a serious player on the global economic stage, with multi-billionaire Eike Batista leading the charge. Some reputable estimates even have the Brazilian economy overtaking Germany’s by 2032. And if the South American nation annexed Portugal, its former colonizer, as some have suggested it should, that country would make up only 10 percent of the combined GDP. The global economic power that Brazil is poised to grab certainly explains President Obama’s controversial trip down south in February. 

Despite Brazil’s good fortunes and promising future, it’s not all sunny beach-going in Rio and beyond. Like so many other countries, Brazil faces the challenge of finding fiscally sustainable ways to support its growing elderly population. By 2020, 15 percent of Brazil’s population — about 33 million people – will be elderly. That number may pale in comparison to China’s, but it’s still going to cripple the Brazilian economy if the current entitlement system isn’t transformed.

Currently, the Brazilian Social Security system is around $26 billion in debt, and there are just 18 million seniors drawing from it — a number just about half of what the elderly population will be in another decade. What’s more, a staggering 65 percent of Brazilian seniors would be living in poverty if it were not for these public benefits.

So while the middle class grows, so, too, does the number of seniors dependent upon middle-class taxes. But unlike their northern neighbors, Brazil’s elderly face a more extreme form of financial trouble without public assistance. For a country with an enormous lower class that has been largely immobile for centuries, one question will be critical in the coming decades: How can it keep its elderly population out of poverty while not bankrupting the country or derailing it from its current upward economic trajectory? While Brazil may turn to the U.S. and Europe for its foreign-exchange policy, it must figure out a solution for enabling an aging population to be part of its economic growth driver – and to continue to create wealth for all of Brazil.

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Executive director of the Global Coalition on Aging, Michael W. Hodin, Ph.D., is also managing partner at High Lantern Group and a fellow at Oxford University's Harris Manchester College.