MercoPress. South Atlantic News Agency

Uruguay's population projected to decline in the coming years

Measures were suggested to mitigate the effects of this process

Uruguay's National Institute of Statistics (INE) released a report last week showing the country's dwindling birth rate, the socio-economic and cultural reasons behind it, and warning of the long-term demographic, economic, and social consequences. This decline began in the 20th century but accelerated significantly after 2015.

The Total Fertility Rate (TFR) —the average number of children per woman— plummeted from around 3.0 in the 1970s to a historic low of 1.27 in 2023 (preliminary data). This is well below the replacement level of 2.1.

Since 2015, Uruguay has entered the category of “very low fertility” (below 1.5 children per woman). In 2023, only 31,381 births were recorded —the lowest figure in decades.

The recent acceleration is due to two demographic factors: First, women are having children at later ages; and second, there are fewer women of childbearing age, as a direct result of prior population aging.

The sharp drop is driven by a convergence of socio-economic and cultural changes, such as a high cost of living, which makes large families economically challenging, coupled with a significant increase in female labor participation (from 30% in 1981 to nearly 60% in 2016), and higher levels of female education are inversely correlated with the fertility rate.

Changes associated with the “second demographic transition” include rising divorce rates, an increase in births outside of marriage, and the growing importance of individual professional careers over large families.

An extreme urbanization -95% of the population lives in urban areas- further concentrates these modern social dynamics, with a picture of population contraction and accelerated aging for Uruguay throughout the 21st century.

Uruguay's population, which peaked around 2020, is projected to decline steadily, potentially losing around 510,000 inhabitants over 50 years, reaching about 3 million by 2070.

In addition, the percentage of people over 65 will more than double, rising from 15.8% today to 32.5% by 2070. By that time, the elderly population will triple the proportion of children under 15, and the median age will rise to nearly 50 years.

Hence, spending on pensions is projected to almost double as a percentage of GDP by 2100 due to an increasingly unfavorable ratio of retirees to workers (falling “support ratio”), which will also result in rising healthcare spending due to the increased incidence of chronic diseases in an older population.

On the other hand, the working-age population will contract, limiting the potential for GDP growth unless substantial gains in productivity are achieved.

Uruguay has a temporary “demographic dividend” until roughly 2035, characterized by lower school dependency. This window could be used to reallocate public resources to improve educational quality, it was explained. However, significant policy measures are necessary to mitigate future risks, including pro-natal and labor policies, such as raising the retirement age, incentivizing skilled immigration, investing in childcare to boost desired fertility, and fostering technological innovation to offset the shrinking workforce. A major risk is the rise in intergenerational inequity, as public transfers become increasingly skewed toward the elderly.

Uruguay's situation is not unique but is among the most severe in Latin America. Nations like Chile (leading the decline), Uruguay (1.27), Costa Rica, and Cuba have “ultra-low fertility” rates (1.3 to 1.5), all below the regional average (1.8). These countries share similar drivers and face the prospect of the earliest and most pronounced population contractions in the region.