Latin America: Paupers With Croesus’ Problems

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In this issue, which is the last of the year, you will find:

•Latin America: Paupers With Croesus’ Problems

•Mexico, Stuck In Its Ways, Risks Angering the United States

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•Latin America: Paupers With Croesus’ Problems
635 words | 3 minutes reading time

The demographic transition has taken Latin America by surprise. Latin Americans are not having enough children; more specifically, the number of children is insufficient to avert population decline. In demographic terms, the region is increasingly mimicking the developed world.

• A priori, the state of affairs is unsurprising. Latin Americans are disinclined to marry, especially in the lowest income deciles. For those who do marry, marriage comes late in life: 10 years ago, for example, the average Argentinian and Brazilian man married at 34.1 and 33, respectively.

• The region usually boasts of its “demographic dividend.” Its population, still very young, is largely in the productive stage of its life. The vast majority do not depend on the state or their families and are capable of earning a living.

• The fear is that this will worsen relatively quickly. Today’s young will grow old; by marrying late—or not at all—and having few children, they will not have produced enough replacements, leading to a contraction of the Latin American population. 

The Data. Almost all Latin American countries have fallen below the replacement rate. This is normally defined as 2.1 children per woman, but depending on a given country’s mortality rate, it can be higher. In general terms, each couple needs to have around two children to prevent the population from falling.

• According to the UN Population Fund, Latin America and the Caribbean has an average rate of 1.8 children per woman. Puerto Rico, a U.S. dependency where the average woman has 1.3 children, has the lowest rate in the region.

• Cuba, Chile, Costa Rica, and Uruguay follow closely with 1.5, although some studies already speak of 1.3. This figure is lower than that recorded in countries such as Denmark and Hungary, where the state laments the serious demographic crisis and offers generous birth subsidies.

• The Guatemalan rate is 2.3 children per woman; the population remains stable or even grows slightly. The same pattern is repeated throughout Central America, with the exception of Costa Rica and El Salvador.

General View. What dismays demographers is the speed with which this change has occurred. There is a tendency to conceive of Latin America as a highly fertile region; the demographic transition has been so rapid that Latin Americans’ self-perception of the region has not changed, hence the lack of awareness.

• Indeed, from 2013 to 2022, the U.S. birth rate fell 7%, partly due to the pandemic baby bust. In the same period, the Uruguayan birth rate plummeted, dropping 34% in a matter of a decade.

• The Uruguayan case was extreme, but Costa Rica, Mexico and Chile registered drops of 27%, 24% and 21%, respectively. In the five-year period between 2016 and 2021, the Argentine birth rate fell 32%, being by far the most pronounced drop.

• States will have to pay their bills with fewer taxpayers. Brazil, for example, already faces a pension deficit equivalent to 2.6% of GDP; this figure is expected to reach 5.9% by 2060. In Mexico, pension expenditures have risen from $7.5 billion in 2020 to $25.6 billion in the 2024 federal budget.

Yes, But. It is unnecessary to speak of a cataclysm. Latin America still has a young, independent, and productive population; its dependency rate, to use the jargon of demographers, will remain low for decades. Increased pension expenditures are a concern, but their recent expansion owes more to crowd-pleasing leaders than demographic necessity.

• Of course, many Latin Americans’ dreams of establishing welfare states will encounter serious difficulties. Their developed world equivalents were born when such countries had a worker surplus, which allowed such schemes to be financed with relatively little trouble.

• Central America is well positioned to benefit from the situation. Its fertility, previously seen as an impediment to progress, now guarantees a greater demographic dividend for countries like Guatemala and Honduras.

• In any case, Latin America, despite its relatively low development level, is facing problems typically associated with the first world.

•Mexico, Stuck In Its Ways, Risks Angering the United States
647 words | 3 minutes reading time

Mexico will hold elections on June 2. The result is clear: Claudia Sheinbaum (Morena, left), AMLO’s hand-picked successor, will win—likely by a large margin. Mexico will have its first female president, but it is unlikely that much else will change. 

• Sheinbaum, former head of government of Mexico City, defeated Marcelo Ebrard in Morena’s internal primaries. Ebrard, a one-time foreign minister, threatened to run and split the Morena vote, but ultimately decided against it.

• A January 22 poll indicates 61.1% of voters would side with Sheinbaum. Only 29.6% prefer the leading alternative, Xóchitl Gálvez (Fuerza y Corazón por México, catch-all). The big-tent opposition has struggled with ideological indecision; Morena at least provides clear, if far from ideal, proposals.

• AMLO has managed to maintain his popularity despite a mediocre presidency. Sheinbaum’s support is entirely inherited from the president, who like Sulla or Cincinnatus, promises to retire to the countryside after leaving office. The new guard, which will take office on December 1, will not bring major changes.

Estrada Doctrine? AMLO is a navel-gazing, provincial leader. In his more than five years in power, he has rarely left Mexico, never venturing beyond the Western Hemisphere; he waited until 2023 to travel to South America, where he visited his ideological allies in Chile and Colombia. Sheinbaum is a more cosmopolitan figure.

• AMLO has not fully grasped the two leading U.S. priorities: immigration and drug trafficking. Mexican diplomats also acknowledge, discreetly, that AMLO’s requests for Spain to apologize for the Conquest have caused some embarrassment.

• AMLO’s relaxed anti-drug policy can be summed up in a phrase he coined: “Hugs, not bullets.” Senator Chuck Grassley (R-Iowa) believes that Mexico is waging an “imaginary” war on drugs, the purpose of which is merely to give the impression of taking action against drug traffickers.

• Mexico’s ineffectual policy upsets the United States, where nearly 110,000 people die from drug overdoses each year. As the leading destination for Chinese “raw materials,” Mexico is essential to the fentanyl supply chain. Washington also suspects that a considerable portion of the $64 billion Mexico receives in remittances are repatriated drug profits.

Between the Lines. This year’s U.S. election cycle coincides with Mexico’s. The most relevant development in U.S. politics—and the least known in Latin America—is that immigration has monopolized the attention of the U.S. electorate. The border crisis will certainly dominate Donald Trump’s campaign.

• The White House, embarrassed by the chaos at the border, is beginning to speak out in less sympathetic terms. Senator John Fetterman (D-Pennsylvania) says unrestricted immigration threatens the American Dream.

• The Republicans, meanwhile, hold the Democrats captive. They will refrain from financing other initiatives, like Ukraine, until a “perfect” border solution is attained. A government shutdown looks increasingly likely.

• It is certain that the parole system will be substantially reformed, if not eliminated. Mexico, which is no longer the main source of immigrants, would be forced to limit crossings of its southern border. The alternative would be to host trekkers with few chances of entering the United States.

The Future. Mexico, in short, may well continue behaving as it has during the past five years. This does not necessarily imply a crisis is brewing: AMLO, after all, began his administration during the Trump presidency. Mexico is, according to most sources, the main U.S. trading partner, which forces both parties to reach an understanding, especially if nearshoring continues to be White House priority.

• Beyond its poor anti-drug policy, Mexico has become stricter on immigration. This goes beyond its border with Guatemala; the country even scrutinizes  air arrivals, to ensure that Mexico does not serve as a springboard for them.

• The country risks continued crime increases. Although there has been a slight drop in the homicide rate, this has been made up by a considerable uptick in kidnappings and extortions.

• The new Guatemalan government has an ally in AMLO and Sheinbaum. President Arévalo will need support: regardless of the outcome of the U.S. elections, Washington, his patron, will urge him to control immigration.