Older and richer
The number of Brazilians aged 50 to 70 years is on the increase. Even with more social security spending, this is another opportunity for Brazil's economy - Stefano Fabiane
Paraná native Acacio Queiroz, CEO of American insurance outfit Chubb in Brazil, showcases a picture frame encasing the 22 business cards he amassed over his career in his office. The first dates back to 1973, when he started selling insurance in Curitiba, at age 25. Today, at 63, Queiroz continues enjoying a busy professional life, which includes 12-hour work days, international travel and the helm of a branch whose assets add up to nearly a billion dollars. "I still get three job offers a year," said Queiroz, who has been officially retired since 2001 through the National Institute of Social Security. In the past ten years, he tripled the assets he had accumulated in the previous decades of work, today comprising real estate, cars, boats, private pension plans and other investments - proof positive that a mature professional can still build up a considerable fortune. Of course, the evolution in assets achieved by Chubb's CEO, a man who has held high ranking positions for a long time, does not represent the average of the population. But Queiroz is part of a poorly studied group in Brazil that is expected to grow almost twofold over the next three decades: Brazilians aged 50 to 70 years. These are people who are at the apex of their intellectual and financial capital
MATURE WEALTH: in the last decade, Chubb CEO Queiroz tripled the family assets
and will be protagonists of what scholars call the second demographic bonus. Brazil is going through a phase in which the population's age profile helps the nation grow. The first bonus comes from the sum of the number of people of working age becoming greater than the total number of children and elderly. Today, for every ten workers who contribute to the economy, there are 4.8 who are idle and need to be supported.
The second bonus comes from an increase in the ratio of those at the zenith of working age. Older and still productive, they accumulate most of the assets and investments in Brazil. And, the more educated this segment of the population is, the greater the driving force on the generation of capital. Although still a far cry from having an ideal level in education, Brazil is enjoying the second bonus. "The first bonus is a window of opportunity that is scheduled to end. The second one, however, is permanent and may have a greater impact on the economy," says Federal University of Minas Gerais demographer Cássio Turra. He figures that by 2045, the second demographic bonus may potentially drive a 2.2% annual increase in the gross domestic product. In other words, if Brazil grew at a rate of 4.4%, half of that would come from the bonus.
CYCLE OF LIFE
Being richer at an older age than in youth is natural. In the cycle of life theory, coined by Italian national Franco Modigliani, the 1985 Nobel Laureate in Economics, saving for retirement is the result of the individual desire of maintaining a stable pattern of consumption throughout life. Nothing more logical, therefore, than people sacrificing some of their immediate consumption to ensure a peaceful old age. Since the Brazilian people's life expectancy progressed (the average is currently 73 years, compared with 45 years in the 1940s), along with
EARNINGS OF MATURITY
In the coming decades, the amount of older Brazilians will grow until reaching a third of the population. This maturity has its good side. They concentrate more wealth and have greater capacity to invest
medical progress and improving living conditions, a large proportion of those retiring remain in the labor market and continue expanding their income. "Half of those who retire withdraw part of their private pension plans to open a new business," says Marco Antonio Rossi, CEO of Bradesco Seguros and chairman of the National Federation of Private Pensions.
With more income, these folks aged 50 to 70 years can spend more. In Brazil, the per capita consumption among the elderly is twice the average of children and young people - a pattern also seen in developed nations like the United States, Sweden and Japan. A study by economist Marcelo Neri, at the Getúlio Vargas Foundation, in Rio de Janeiro, shows how aging is an important factor in climbing in the social ladder. An example: in 1993, only 8.3% of Brazilians aged 40 to 44 years ranked in the AB class. Fifteen years later, in 2008, this group has aged and increased: 18% of those aged 55 to 59 years were in the higher consumption ranges. The projection for 2013 is that 23% of this group - now more than 60 years old - will be in the AB class.
In Brazil, the per capita consumption of the elderly is equivalent to twice that of the average of young people and children
The effects of the second demographic bonus have brought about a new set challenges to businesses, which have always treated those in their fifties and sixties as a submarket. São Paulo construction company Tecnisa sells 25% of their properties to customers aged more than 50 years. Most of them buy apartments measuring up to 120 square meters. "It is likely this is the last property they will buy in their lives and, thus, they see themselves getting older in it," says Romeu Busarello, marketing director for Tecnisa.
Therefore, 90% of the company's new ventures feature attributes that make the building adaptable to the elderly, such as larger bathrooms. Of course, an aging population does not represent only advantages. It involves addressing issues such as increased spending with health and social security, and its impact on government accounts. The National Transfer Accounts project, linked to the University of California at Berkeley, which monitors the transfer of resource among generations in the world, estimates that tax collection in Brazil will not keep pace with the evolution of pension costs. If no reform is made, the revenue/spending ratio will be 31% lower in 2050 than it was in 2010. Yes, Brazil will be older and richer, but it will also be more difficult to support the public retirement system.