Latin America Advisor

A Daily Publication of The Dialogue

Can Latin America Replace Jobs Lost in the Pandemic?

People lining up outside a job fair in Colombia. // File Photo: Colombian Government. The coronavirus pandemic has put tens of millions of people out of work across Latin America and the Caribbean. //. File Photo: Colombian Government.

The United Nations International Labor Organization said last month that at least 34 million jobs have been lost across Latin America due to the coronavirus pandemic, urging countries to adopt “immediate strategies” in order to deal with the unprecedented problem. What strategies and tactics can countries use to more quickly recover jobs? Which industries will governments in the region target for support, and should they invest more in strategic or nontraditional sectors to create new employment opportunities? To what extent will the jobs that have been lost come back once the pandemic eases, and what other problems will stem from the job losses?

Salvador Paiz, president of FUNSEPA and board member of FUNDESA in Guatemala City: “We have been overwhelmed with data on infection rates and fatality rates stemming from the Covid-19 pandemic. However, the fatality rate of corporations, surging from the pandemic or the public policies to contain it, has not received the same level of attention. Corporations are at risk, particularly those with pre-existing conditions such as having exposure to tourism, or those in younger age-brackets, or those with smaller and medium-size builds. The death of these small- and medium-sized businesses has led to unfathomable amounts of job losses. Unlike a ‘normal’ crisis or macroeconomic cycle, this one has left behind massive economic tissue damage, which warrants a commensurate response. Countries in Latin America must act quickly to prevent permanent stunting and should take advantage of the dislocations caused by ‘near-shoring’ and the search for resiliency in global supply chains. Deliberate and country-specific efforts must be made toward identifying and stimulating synaptic growth toward sectors with high global demand and high market access, adjacencies in the product space and products with revealed comparative advantage, all as per Ricardo Hausmann’s research. In addition, economic actors must be incentivized to make ‘big bets’ and to leapfrog into the product spaces of the future. The U.S. International Development Finance Corporation could play a critical role by bringing economic science and focusing resources to the post-Covid recovery. The region’s governments are highly leveraged, and direct stimulus packages have all but dried up. The future policies must recognize those constraints and stimulate the regenerative growth of new and existing firms. Jobs will hopefully follow.”

Gimena Sánchez-Garzoli, director for the Andes at the Washington Office on Latin America: “A multitude of factors accelerated by the global Covid-19 pandemic and restrictions necessary to stop its spread is bringing about an unprecedented global crisis related to employment. According to the ILO, approximately 81 percent of the global work force has been negatively affected. Workers in the informal economy and without adequate labor protections, a large sector in Latin America, face huge obstacles. This leads to hunger, migration and violence. There is no quick magic fix, and this is not something that governments can overcome by themselves. They will require support from the private sector. Tools that can help are economic and employment stimulus packages, protecting and supporting businesses while at the same time strengthening labor rights and fomenting social dialogue. In Latin America, Afro-Colombians, Indigenous people and women, as well as the rural sector, need protection from discrimination and abuse, as well as guarantees to be able to unionize, decrease subcontracting and defend against practices that depreciate their labor and make their jobs disposable. The overall situation of how well governments are tackling these obstacles is measured by how well they address their impact on the most vulnerable sectors.”

Manuel Agosin, professor in the school of economics and business at the University of Chile: “The jobs fallout of the pandemic will be terrible in Latin America. Many jobs have just disappeared, as firms have gone bankrupt. The big push to get jobs back is being hampered by the impact of the pandemic on fiscal budgets. Most of the countries in the region already had significant and unsustainable budget positions before the pandemic. Voluntary lending from international markets to strapped governments is highly unlikely. That leaves the multilateral financial institutions as the only ones that can provide the finance needed to subsidize investment (through accelerated depreciation provisions) or directly subsidizing employment. The Chilean government, whose debt is lower than those of most other countries in the region, has just unveiled a plan to subsidize employment, with special provisions for the hiring of young people and women. Historically, unemployment among the young has been much higher than that of mature workers. And women have borne the brunt of the pandemic’s fallout on jobs, as schools and day care centers have closed. The assistance of the Inter-American Development Bank, the World Bank and of subregional financial institutions will be essential to combat unemployment and a sharp increase in poverty.”

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