CAF: Accelerated aging of Latin America will worsen fiscal deficits

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Madrid, Jul 2 (EFE) .- The “generalized, accelerated” aging of the Latin American population will have an important fiscal impact in the region, according to the conclusions of the 2020 Economy and Development Report (RED) of the CAF, presented this Friday in House of America in Madrid.

Currently, just over 8% of the Latin American population is 65 years of age or older, well below the 18% of Europe.

However, it is estimated that this proportion will have doubled in 2050 to reach 17.5%; and by the end of the century, it will exceed 30%, according to the development bank of Latin America (CAF) in a statement.

“Currently, pension systems show deficits averaging around 2% of GDP in the countries of the region, and which will worsen as a result of the aging process,” said Fernando Álvarez, senior economist at CAF.

In his opinion, that pensioners receive “a sufficient minimum income” is one of the great challenges, as well as the financial sustainability of the systems.

Pablo Sanguinetti, CAF’s vice president of Knowledge, considered that the pension and health reforms generate short-term costs, “but a great long-term benefit”, and require “broad political consensus sustained over time to put them into practice” .

These systems generally require additional public financing, since they cannot be sustained only with contributions from companies and workers, especially “when they want to implement and strengthen non-contributory pensions.”

He stressed that the tax changes necessary to close the deficits of the pension systems must be supported by “reliable and independent information and evidence”, so that citizens “better understand the need for these reforms.”

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