Youthful Brazil is aging rapidly

RIO DE JANEIRO – For Lieda Sobrosa, retirement from her Brazilian government job 23 years ago was just the beginning.

An accomplished pianist who is writing her seventh book since becoming a pensioner, the 73-year-old has not lacked the time or money for a productive second act to her life. The slightly built author retired from the federal civil service at the age of 50, way back in 1987, and has been banking her full monthly salary of about 6,000 reais ($3,275 Cdn) ever since.

"I didn’t deserve to retire," she admits, sipping a pineapple juice on a Rio de Janeiro street corner.

"Really I believe that everyone should work while they have the health and the energy."

For her long and prosperous retirement, Sobrosa can thank one of the world’s most generous pension systems – at least for some – a behemoth that sucks up a third of government spending and stunts Brazil’s economic potential even though it is still a young country in demographic terms.

Without politically difficult reforms, the growing burden threatens to sour the success Brazil’s economy has enjoyed under President Luiz Inacio Lula da Silva, who will step down after the presidential election in October.

That is because Brazil, a country long associated with youthful beauty, is entering a period of rapid aging that will change its face. The number of Brazilians over 60 will jump by more than half over the next 15 years to around 32 million.

By 2050, government forecasts show the number will have tripled even as Brazil’s overall population contracts after hitting a peak of around 210 million in 2030, from 190 million now.

The regular pension system alone – which doesn’t include public employees – is on course to swallow up 17 per cent of GDP by 2040, from 7 per cent in 2007, according to a report last year by the Center for Strategic and International Studies.

The demographic shock in Brazil and in other Latin American countries is comparable to a rapid aging of populations in Asia.

The changes are a result of plunging birth rates and rising life spans that have come amid economic and social progress in a single generation. But rises in Latin American living standards have lagged those in Asia, meaning the region risks hitting old age before its economies mature.

By 2050, there will be an estimated 3.1 working-age adults in Latin America for each elderly person, shrinking from 8.7 in 2005, nearly tripling the burden on each worker.

GRAY COPACABANA, "VIAGRA" WEDDINGS

Brazilians’ life expectancy has shot up to near Western European levels from just 43 in the 1940s, while the number of births per woman has tumbled to 1.8 from near 6 in 1970.

Sobrosa, for example, has nine brothers and sisters, all of them still alive,

"Effectively, this situation is explosive," said Istvan Kasznar, a professor who studies pension issues at the Getulio Vargas Foundation in Rio.

Nowhere is the change more visible than in Rio’s Copacabana beach area, whose picture-postcard image of bikini-wearing young women and youths playing beach soccer belies its status as Brazil’s elderly capital. About one in three of its residents are over 60, a higher ratio than in Japan.

"You don’t see babies in Copacabana anymore – it’s a completely different place to when I was a child," said Alexandre Kalache, a 64-year-old Brazilian who was head of the World Health Organization’s Aging and Life Course Program for more than a decade until 2008.

Underscoring the transformation, the Copacabana maternity hospital where Kalache was born in 1945 is now a geriatric clinic. Like many Brazilians, Kalache has stories of friends and relatives who retired in their 40s on a comfortable pension, usually from the civil service or the military.

"That is what is destroying the country," he said.

"If we don’t have reform, if these inequalities don’t stop benefiting the elite, we are going to lose this opportunity forever. We have just a few years to get our house in order and I’m scared."

Brazil’s around one million retired civil servants make up less than 5 per cent of all Brazil’s pensioners, but get about 40 per cent of the benefit payments, government figures show.

That gives the public sector a disproportionately heavy role in Brazil’s growing pension deficit, which last year totaled about 86 billion reais ($48.6 billion Cdn) or just under 3 per cent of the economy.

The regular pension system, where benefits are tied to a national minimum wage that has doubled in a decade, is also generous. Women, for example, can retire at 60 after paying only 15 years of contributions. Full "survivor" benefits mean that spouses inherit a pension regardless of the length of marriage.

That appears to have encouraged a growing trend dubbed by Brazilian media as "Viagra weddings" – elderly men remarrying much younger women. It can work the other way, too – Sobrosa, the pensioner in Rio, recently married a man 20 years her junior who stands to inherit her benefits.

"The pensions system is not generous for all Brazilians, not at all. It is very generous for some kinds of Brazilians," said Kasznar, who noted that fewer than a third of Brazil’s 94 million potential workers are in the system.

REFORM PROSPECTS MIXED

An aggressive reform of the system could free up government spending for areas where Brazil lags other countries and which limit its long-term potential, such as infrastructure investment and education.

The wildly popular Lula, who has largely steered clear of deep-seated reforms, managed to pass a partial pension reform in 2003 that raised retirement ages and should bring public pension benefits in line with private ones within 50 years.

That warded off an immediate deficit crisis and enabled Lula to spend on social projects while keeping financial markets happy, but it was not enough to defuse the demographic time-bomb.

Powerful political forces oppose reform of a system that is a remnant of the young nation’s attempts to build a strong and loyal civil service in the early 20th century.

Both of the main candidates in October’s election – Lula’s chief of staff Dilma Rousseff and Sao Paulo Gov. Jose Serra of the opposition – are expected to make pension reform a priority but will struggle to get more than piecemeal changes through Congress.

"It’s very difficult to see a permanent solution. It’s not a problem the politicians want to deal with – no one wins," said Joao Pedro Ribeiro, a political analyst at the Tendencias consultancy in Sao Paulo.