Ronaldos and Giseles apart, most mortals follow a similar life script. First we experience the delicacies of childhood and adolescence. Then comes the time to start working, a time marked by great effort and little money. With time, opportunities emerge and the challenge is to guarantee a peaceful rest in the end. Thus we pass on generation to generation. Countries also follow a similar trajectory, with different levels of success. Initially, young nations have a great slice of the population below the working age. With time, the children grow and start working. It is an ideal period to take advantage of the impetus and grow. Then comes the aging phase, in which the economic impetus disappears. If everything goes well in this path, there will then be enough wealth to finance the rest of the aged ones.
Brazil was once a young nation. And we will be an old country in future. The good news is that we are now at the peak of the productive period. There is a new demographic and social phenomenon going on in the country: the mass maturing of the population. The vertiginous population growth has been left behind. After growing geometrically for two centuries, the number of Brazilians is increasing less and should not exceed the mark of 220 million. At the same time, with the life expectancy of 73 years, the country today has two-thirds of the population between 15 and 64 years – age range considered to be more economically productive. The proportion of those in working age will continue to grow up to 2022, when it will reach a peak of 71%. The forecast is for the number of Brazilians in active age on this date to pass from the current 130 million to 147 million. The business chances opened by this silent transformation are great. “If in ten years, we do not open 100 million new accounts, it is because something went wrong”, says Luiz Carlos Trabuco Cappi, president of Bradesco. According to estimate by the Brazilian Federation of Banks, the number of bank agencies in the country should grow by 50% in the next decade, meaning the creation of about 150,000 workstations. The growth in the bank sector is just an example of the leap expected in countless markets in the next decade.
“This is a unique chance in the history of any country”, Ronald Lee, director of the demography & economics department of Berkeley University and member of the American Committee on Aging Research , told EXAME. The chance Lee refers to has been baptized by experts as demographic bonus - the phase with the maximum possible number of people working. A forecast made by professors Cássio Turra and Bernardo Queiroz, from Universidade Federal de Minas Gerais, shows that Brazil has a growth potential of 2.5% per year generated exclusively by the demographic bonus. Another count, made by Marcelo Neri, researcher from the Social Politics Center of Fundação Getulio Vargas (FGV), suggests an increase of up to 2.7% per year in the average income of Brazilians in function of the bonus and increase in education, started in the 90s. In the scenario elaborated by Turra & Queiroz, Brazil, if it grows by only the annual average of 2.5% allowed by the demographic bonus, will reach 2030 with a gross domestic product of 3.3 trillion dollars, 50% greater than the current one. The country, however, has grown more than this – and economists evaluate that it will be possible to maintain a pace of 4.5%. This would raise, in the same term, the GDP to 4.8 trillion dollars, enough to reach an income standard equivalent to that of Portugal today. In a more optimistic hypothesis, of the bonus being used to boost more comprehensive reforms, in two decades, Brazil would reach the current per capita income level of Spain and would have a GDP of 7 trillion dollars. “Brazilians are standing before a golden opportunity, but it is temporary. After two decades, the aging of the population will invert the curve and cause the proportion of inactive people to rise. Therefore, to make the most until then, Brazil should invest heavily in the new generations, especially by providing good basic education”, says Lee. The message is clear: we have 20 more years to do the homework, modernizing the economy and improving the quality of education, and thus become a rich nation. Otherwise, we will be in the worst of the worlds. We run the risk of aging without being able to join the club of developed countries – and then it will be very hard to get there. .
The bonus originates from a change in the behavior of Brazilian families. Since the mid 60s, there has been a progressive fall in the size of families. The average number of children per woman, which was six half a century ago, dropped until it reached less than two today. Elected president Dilma Rousseff – from whom a set of policies is expected to make the most of the demographic bonus, is an example of the new Brazilian woman. She had only one daughter, who in turn recently gave her her first grandson. The average age of the population, formerly less than 20 years, is currently close to 29, and will continue to rise. The demographic pyramid changed shape and is now a more rounded figure. In the present point, majority of those who were young in the previous decades have not yet become senior citizens and constitute an unprecedented generation of more mature Brazilians and who are at the peak of their professional careers. The result is that the ratio between people who do not work and those who do fell from more than seven inactive people (whether child or elderly) for to group of ten workers, 20 years ago, to less than five to ten. At the height of the bonus, in 2022, this ratio will be four to ten. When there are less people who need to be supported, the abundance of the population in active age is dynamized and the economy generates additional resources that can be reverted into savings and investment. This reinforces the economic growth and generates opportunities in countless markets.
The change in demographic profile of the Brazilian population should cause some sectors from the economy to experience a fast growth rate in the next decade, which should place Brazil among the world leaders in various segments. Cosmetics are a good example. Today, Brazil is the third biggest perfumery & beauty product market in the world, behind the United States and Japan only. If the growth forecasted for the sector is confirmed - 9.6% per year, according to an estimate made by the consulting firm Euromonitor at EXAME's request, the Brazilian cosmetic market should reach 108 billion dollars in 2020, almost double that currently observed in the United States. “Majority of our consumers are mature”, says José Vicente Marino, vice-president of business for Natura, the biggest cosmetic company of Brazil. “A good part of our growth in recent years can already be attributed to the bonus." The aging of the population should also boost the medical service segment, which includes expenses with consultations, tests and hospitals. Today, Brazilians spend a little more than 56 billion dollars, an amount that should reach 112 billion in 2020, more than what is currently spent by Germany, at about 90 billion dollars. The expenditure with education, according to forecasts by Euromonitor, should also double in the next decade, from 91 billion dollars to 182 billion dollars.
Studies show that the demographic bonus was responsible for a third of the growth of the Asian Tigers between 1965 and 1990
For companies, a central data is the profile of the average Brazilian a decade from now, when the demographic bonus will be thrusting the company forward with maximum force. It will very likely be close to that of Ana Rita Mazza Menani. At 33 years of age, married, with two children, graduated in social communication, she and her husband, Rogério, have small printing press in Monte Alto, in the São Paulo interior. Together, they have an income of about 8,000 reais per month. They live in a comfortable house and they have two cars and two motorbikes in the garage. Home appliances, furniture and computer are not lacking in the home. The children, aged 7 and 13 years, study in a private school, take English, arts, music and sports classes. “We invested about 25% of the family income in their education”, says Ana Rita. “It would be more difficult to maintain the standard had we had more children. The people of my generation do not have conditions to have more than one or two children”. Although much has been said about the growth at the base of the pyramid, the example of Ana Rita illustrates that the economic ascension ongoing in the country will bequeath a social structure with preponderance of the middle and high classes. In this new society, some behavioral trends are beginning to be detected. The growing importance given to the education of one’s children is one of them. The development expected for the next decades is linked to strong investments in education and formation of skilled labor – one of the direct consequences of the bonus. “We have left a very low education to a less bad level, and has already been favoring development for some time", states Neri, from FGV. “Our portrait would very likely have been much worse if not for this. What we need to do is to advance with more ambition in the education sector, so as not to waste the bonus".
This need causes schools to constitute a market that is obviously among those proliferating the most in Brazil today. According to Euromonitor, this sector should grow by almost 10% per year in Brazil up to 2020, when it will reach 400 billion reais. The expansion has attracted foreign investors, mainly to work in higher education. The American group DeVry arrived in the country three years ago. It set up in the Northeaster Region and already has 14,000 students in its four units. “We saw a great opportunity in the Brazilian education market”, says Carlos Filgueiras, president of DeVry’s local branch. “The growth potential is very great. Today, only 30% of Brazilian youngsters between 18 and 22 years of age are in college. In Greece, the rate is more than 90%.” According to him, the effect of the bonus is already perceptible, but it can be more intense because classes C and D are beginning to have access to the universities. “This should boost the sector in the coming years”, he says.
MORE INSTRUCTED YOUNGSTERS FOR THE MARKET
Youngsters have come more and more prepared for the job market. Gabriella Rosa, aged 23 years, beat over 10,000 candidates to obtain one of the new trainee vacancies in Whirlpool, manufacturer of Brastemp and Consul products, in January this year. Gabriella studied in a good school, attended several courses and graduated in business management from Universidade de São Paulo. “I believe that the good education added points for my first hiring.”
MATURE AND WITH GREATER CONSUMER POWER
The consultant Flávio Santos, aged 50 years, bought a zero-kilometer Nissan Sentra two months ago. The dream of the new car was only possible after her daughter’s graduation in college. Without the burden of a dependent, there is more money left today for consumption. “I go out to restaurants more, buy better clothes and I'm still able to save some money", he says.
Who should grow more
Many sectors of the Brazilian economy are encouraged by the change in the population’s profile. See the forecast of increase in expenses in some products and services (in billions of reais)
Potential To Be Discovered
Curiously, many companies have not yet noticed the market potential opened by the change in Brazil's demography.
Recently, on promoting for a six-month study with its 100 top executives to identify trends and plan the next ten years, the
Promon engineering group discovered the bonus. “The subject of demography raised some eyebrows in our meetings”,
says Luiz Fernando Rudge, president of Promon. “People do not notice its effect in the day-to-day, but we saw that the
impact is dramatic over the decades". Promon identifies business areas that will be particularly attractive in a scenario
of the population’s aging, like health and well-being. “We can invest in the construction and operation of hospitals and
condominiums for more elderly people", states Rudge.
In addition, with the perspective of a more consistent economic growth, several infrastructure sectors in which Promon operates, from energy to telecommunication and information technology, should also be positively affected. According to a study by the consulting firm Ernst & Young, the change in demographic profile of the Brazilian population should give even more impetus to the civil construction sector. It is estimated that, each year, about 1.7 million new families will be created in the country. Up to 2030, there will be at least 35 million new families, mainly from the rising class C, that will need a place to live. It is another trend that is being detected: the emergency of small families in free social ascension.
Construction companies have already noticed the phenomenon and have been adapting their products to the new consumers. “Families are becoming smaller and smaller. Consequently, apartments should also become more compact”, says Antonio Carlos Ferreira, director of incorporations of Gafisa, one of the biggest construction companies in the country. In 2007, families had in average 3.1 people. In 2030, only 2.4 people per residence is foreseen. The logistic operator from Minas Gerais State, Lando Tavares, aged 34 years, bought his first apartment approximately one month ago. Married for four years and father to a 2-year old girl, he took the opportunity of the salary increase and the abundant offer of credit to finance in 25 years a property evaluated at 100,000 reais. Tavares represents the new Brazilian family – small and more concerned with quality of life.
An older population also brings changes in terms of objects of desire. A growing segment is made up of mature men and women with money to spend. Aging usually makes consumers more demanding. For automakers, this should produce a change in demand. The participation of bigger and more equipped vehicles should grow considerably in the coming years, with rise in the sales of medium sedans and luxury models. “They should take over part of the popular vehicle market”, states Stephan Keese, partner of the specialized consulting firm Roland Berger. “Older people usually have more money and buy better products”. Compact vehicles currently answer for 69% of the Brazilian market, against 15% of medium sedans. In 2020, the share of popular vehicles should fall to 63%, while that of medium vehicles should rise to 20%.
The luxury car market should also double, to more than 50,000 units per year. “In the United States and in Europe, basic cars are more complete because they are designed for an older and more demanding population", says Keese. This is exactly the wager recently made by the Japanese brand Nissan to grow in Brazil. Having set up in the country in the 90s, Nissan launched in 2007 the Sentra model, that which “does not have the old-guy look”. The sedan, with a cost as of 55,000 reais, obviously does not have young people as target-audience. The intention was to call the attention of mature men, the potential consumers. “When we arrived in Brazil, we already new the aging trend of the population. We were sure that the segment would grow", states Murilo Moreno, marketing director of Nissan. “The average ticket is on the rise. Luxury cars will be seen more often on the streets".
Each year, approximately 1.7 million new families are formed in Brazil - this gives a total of 35 million up to 2030
SMALLER FAMILIES ANS RISING SOCIALLY
The Tavares family represents the profile of the new Brazilian middle class family - increasingly more concerned with quality of life. Lando Tavares, aged 34 years, is a logistics operator and his wife, Mara, is a housewife. They have a two year old daughter, Luisa. The monthly income of 2,500 reais was enough to finance an apartment of 100,000 reais. “This is feasible because our family is small", says Lando.
THE EXEMPLE COMES FROM ASIA
The legion of mature consumers should boost the growth of the markets, which were formerly little significant. A concern is to age well and with health. This new reality causes the dairy industry, for example, to need a new business plan for the coming years. With the increasingly smaller child market, it does not make sense to invest millions of reais in products with little possibilities of growth. The focus is now on functional milks, rich in calcium and other vitamins and consumed by adults. “These products should grow by 300% in the next five years”, states Fernando Falco, president of Leitbom, controlling company of the Parmalat brand in Brazil. According to him, in the next two years, Parmalat should release at least seven new functional milks and only two products intended for the infant public. The growth in the number of adults in search for a healthier life benefits a range of companies that goes much beyond food manufacturers. Brazil is already the second market in the world for gyms, second only to the United States.
All countries today regarded as developed benefit from changes in the population profile to reach higher stages of income and quality of life. In Europe, Japan and the United States, the demographic transition was slower, having started with the industrial revolution. There, the advantages began in the 19th century, with an increase in the population brought about by the scientific achievements and development of the urban sanitation infrastructure. It was an evolution that extended to the beginning of the 20th century, with the reduction in child mortality and increased access to medical services and education. The initial impetus, from increase in the populations, was later contained by the fall in birth rate. In Asia, except for Japan, the advancements in quality of life of the population came after the Second World War. However, with the technologies and knowledge already available, the adoption of improvements was intense, which generated a fast transition. In countries like South Korea, Singapore, Hong Kong and Taiwan, the demographic change that started in the 60s generated an increase in the workforce that served as base for the takeoff of the economies. The governments of these countries were able to perceive that a population with greater life expectancy would also need to be more educated and that the business environment would have to be nourished. The transformation seen in three decades made the four countries worthy of the nickname Asian Tigers. A study conducted by researchers David Bloom and Jeffrey Williamson, from Harvard University, concluded that the demographic bonus generated a third of the growth of the four tigers between 1965 and 1990. "The change in the population profile was a determinant factor for the Asian 
economic miracle", states Bloom. “Up until then, these countries had been growing slowly due to the excessive weight of a much younger population”. The study shows that, during the transition, the local mass of workers grew at the rate of 2.4% per year, while the total growth of the population was of 1.6%.
The bottleneck of education: even with increasingly heavier investments, Brazilians still suffer from the lack of quality education
Brazil still faces many challenges ahead. According to experts, the country may waste part of its demographic bonus
South Korea set the foundations of its success even before the bonus arrived. Devastated by the war of the 50s, the country began to invest in education and made a series of reforms for its economy to take off. Later, in the mid 80s, when it reached the demographic transition period, it was already duly prepared. In three decades, South Koreans multiplied their per capita income by 8, to close to 20,000 dollars, double that of the Brazilian, and entered the club of rich countries. The country currently taking greater advantage of the demographic transition is China. Thanks to the draconian policies of birth control introduced by the government in the 70s, the country has reaped the fruits of an age structure that is presently favorable - since the 90s, there are increasingly less children and increasingly more work-able adults.
Each year, millions of Chinese enter the job market and increase the already large local labor contingent. To provide jobs to so many people is a challenge, but the country has been able to do this. With low cost to produce almost everything, the great Chinese population is the driving force behind the second biggest economy in the world. It is estimated that the bonus was responsible for up to 30% of the growth in China's GDP in the last decade. In addition, the phenomenon helped remove about 400 million people from poverty in the last 30 years. Likewise Brazil, China has about 20 years of demographic bonus ahead. There is however a clear difference in how the opportunity is faced there and here. “People have not yet realized in Brazil that we are before a temporary window”, says Rogério Rizzi de Oliveira, partner of the consulting firm Monitor Group. “The Chinese run to maintain the growth above 10% because they know this can only be done in a short term. We in Brazil must also quicken our pace”.
The challenges for Brazil to make the most of its window of opportunities are however still many. We have an economy with the modernity and efficiency required to generate high-quality economic growth. “The next government will have to work a lot so that we can take a leap. Otherwise, we run the risk of wasting part of the bonus", states Rubens Ricúpero, former minister of Finance and director of the Faculty of Economics of Fundação Armando Alvares Penteado, in São Paulo. We have the next two decades to attain a standard of rich country – after, the window of opportunities will be gradually shut. If the transition is not duly taken advantage of, the Brazilian society will be facing a new and dramatic picture in 2040 thereabouts: that of a nation of elderly citizens who did not sufficiently improve their quality of life and, worse, without resources to support old age. The warning of this dark scenario is given today by the European countries, where social security systems and maintenance of social welfare are in crisis. This is taking place even in places that reached high levels of per capita income, like France, the United Kingdom and Italy, and, in a worse fashion, in those that did not become so rich, like Greece, Portugal and Poland. A difficult issue to be faced is that of health.
“The cost to treat an elderly person is much greater than that for a young person”, states economist Paulo Tafner, researcher from Instituto de Pesquisa Econômica Aplicada. “Up to 2040, the Brazilian expenditure with health will be multiplied by 3”. If the country is not suitably prepared, the already deficient public health system will collapse. There is the same impact in the accounts of the already deficient Social Security. “One must recognize that the country is not ready to have 30 million or 40 million elderly people, which should occur in the coming decades", says Carlos Eduardo Gabas, Minister of Social Security According to Ronald Lee, from Berkeley, Brazil will have to reevaluate its retirement system, which he considers to be likely the most generous in the world in relation to the level of per capital income. “There is no doubt that there are many poor elderly people who need the pensions, but I suspect that there are many people receiving more than they need", states Lee. “The current model will not be sustainable in the future”.The cost of Social Security in relation to the GDP is already two times that of the United States, and the average age of the Brazilian is still lower than that of Americans. These are issues that should be in the order of the day. They are not. Making a parallel with what Florentine thinker Niccolo Machiavelli used to say of the Prince, one must have virtue and fortune – competence and luck, to succeed. Everything indicates that luck is on the side of Brazil. We must now show virtue to make the most of the window of opportunities. There are 20 years – and the clock is ticking.
