## Latin America's Shifting Demographics Could Undercut Growth

_IMF Blog, April 23, 2024_

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**Canonical URL:** [Latin America's Shifting Demographics Could Undercut Growth](https://www.imf.org/en/blogs/articles/2024/04/23/latin-americas-shifting-demographics-could-undercut-growth)

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## Bibliographic details
- Authors: Gustavo Adler, Rodrigo Valdes
- Published: April 23, 2024

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### Overview and growth projections
- Latin America’s workforce grew by nearly 50 percent in the two decades before the pandemic, helping boost economic growth.
- We expect growth in Latin America to average about 2 percent per year in the next five years, below its already low historical average.
- Projections for other emerging market economies are: 3 percent annually for those across Europe and 6 percent annually for those across Asia.
- The weaker outlook partly reflects long-standing challenges of low investment and slow productivity growth, compounded by turning demographics.

### Demographic shifts and labor force implications
- Population growth will continue decelerating, falling from about 1 percent per year in the two decades preceding the pandemic to about 0.6 annually in the next five years.
- The demographic dividend is fading as the region’s population is aging and the share of the working-age population is peaking.
- The share of the population able to generate income will stop growing; this share had been growing until now, enabling the labor force to grow 0.5 percent per year since 2000.
- We expect no growth in the share of working-age population over the next five years, on average.
- A larger population increases revenues to repay high debt levels, but does not automatically mean rising income per capita.

### Boosting labor force participation (key policy levers)
- Female labor force participation is low: 52 percent of working-age women compared to 75 percent of men.
- Policy actions suggested:
  - Expand childcare programs.
  - Provide more training for women.
  - Ensure household taxation does not discourage secondary household earners.
  - Eliminate asymmetric childcare and parental leave benefits between men and women that discourage hiring of women or affect their pay.
  - Provide vocational training opportunities.
  - Raise the retirement age and eliminate disincentives for work after retirement.
  - Adopt policies that facilitate employment of older workers.
  - Tackle crime, an important factor behind migrant outflows in some parts of the region.

### Raising labor productivity and structural reforms
- As demographics become less favorable, countries will need to put more effort into raising labor productivity growth by:
  - Tackling poor governance.
  - Reducing stringent business regulations.
  - Addressing widespread informal work that constrains firms’ growth and associated productivity gains.
- Raising productivity will help raise living standards even amid demographic headwinds.

### Conclusions and strategic emphasis
- Latin America’s strengthened macroeconomic frameworks helped countries navigate recent global recessions and avoid a repeat of past crises.
- With demographic fortunes turning, countries must leverage this resilience to focus on boosting potential growth through higher participation (especially of women and older workers) and productivity-enhancing reforms.

*Gustavo Adler and Rodrigo Valdés; April 23, 2024.*

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## References

- [expected to slow](https://www.imf.org/en/Blogs/Articles/2024/04/10/world-must-prioritize-productivity-reforms-to-revive-medium-term-growth)
- [Brazil](https://www.imf.org/en/Publications/CR/Issues/2023/07/31/Brazil-2023-Article-IV-Consultation-Press-Release-Staff-Report-Staff-Supplement-and-537328)
- [Mexico](https://www.imf.org/en/Publications/CR/Issues/2023/10/31/Mexico-2023-Article-IV-Consultation-Press-Release-and-Staff-Report-541023)
- [Tackling crime](https://www.imf.org/en/Blogs/Articles/2023/12/18/latin-america-can-boost-economic-growth-by-reducing-crime)

_Source: https://www.imf.org/en/blogs/articles/2024/04/23/latin-americas-shifting-demographics-could-undercut-growth_