IDB„s Chief Economist website

During this period, the number of children per worker will fall rapidly in the region, while the number of pensioners will remain relatively low. As a result, an unusually high proportion of Latin America's population will be economically productive, a factor that should allow for substantial increases in education spending per child--perhaps without even having to increase tax rates. Better schooling, he said, is the key to both reducing unemployment and increasing wages.

While the window remains open, countries that switched from pay-as-you-go pension systems to fully funded schemes should be able to boost domestic savings rates and accumulate funds to cover the retirement of their own "baby boomers," according to Hausmann.

In this scenario, those retirement nest eggs would finance the investments needed to bolster growth and build the sort of economic future in which workers are spared the anguish and limits of the current conditions in Latin America's labor markets.

But despite the good demographic news, governments will still have to deal with a serious accumulation of problems: high rates of unemployment, the growth in informal sector jobs and a yawning wage gap between skilled and unskilled labor.

Rigid labor regulations have remained largely untouched in most Latin American countries. Burdensome payroll taxes deter businesses from recruiting new employees and prompt others to resort to informal job arrangements. More than half of all young Latin Americans leave school without finishing their secondary education and will have no chance of earning the sort of wages their college-educated counterparts can command.

Resolving these problems will require labor law reforms as well as a mixture of expanded educational resources and facilities for young people, coupled with more comprehensive and effective job training programs for adults, Hausmann said.