Demographic Changes in Latin America: The Good, the Bad and …

By Santiago Acosta Ormaechea, Marco A Espinosa-Vega, Diego Wachs

April 13, 2017

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Santiago Acosta Ormaechea, Marco A Espinosa-Vega, and Diego Wachs. Demographic Changes in Latin America: The Good, the Bad and …, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The paper develops a simple, integrated methodology to project public pension cash flows and healthcare spending over the long term. We illustrate its features by applying it to the LAC5 (Argentina, Brazil, Chile, Colombia and Mexico), where public spending pressures are expected to increase significantly over 2015-50 due to demographic trends and rising healthcare costs. We simulate alternative pension reforms, including the transition from a defined benefit to a defined contribution pension system and the fiscal burden of a minimum guaranteed pension under the latter. We also analyze public healthcare outlays in the LAC5, which is likewise expected to increase significantly over 2015-50 due to aging and the so-called excess cost growth factor of healthcare services, showing that curbing the evolution of the latter (e.g., through enhanced competition in the healthcare sector) could aid in containing spending pressures. Despite its simplicity, the methodology yields projections that compare well with other approaches. It therefore provides a good benchmark for assessing alternative reform scenarios, particularly in data-constrained countries.

Subject: Aging, Expenditure, Labor, Pension spending, Pensions, Population and demographics, Retirement

Keywords: Aging, Cash flow, Contribution rate, DB system, DC system, Defined contribution, Inflation rate, Pension spending, Pension system, Pension system reforms, Pensions, Public healthcare spending, Public pension spending, Replacement rate, Retirement, Western Hemisphere, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/094
Stock No:

WPIEA2017094
ISBN:

9781475594775
ISSN:

1018-5941

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