Latin America Advisor

A Daily Publication of The Dialogue

How Can Latin America Help Its Most Vulnerable?

A vendor in Ciudad Juárez, Mexico, is pictured above. File Photo: Municipality of Ciudad Juárez.

As Latin American and Caribbean countries grapple with the coronavirus outbreak, the region’s informal sector—which is estimated to represent 53 percent of the employed population and a third of total GDP, according to the International Labor Organization—is especially vulnerable both to the health and economic aspects of the pandemic. In what ways is Covid-19 affecting informal workers in the Americas? Which governments have implemented the best measures to protect informal sectors, both in terms of health care services and economic relief, and which ones should ramp up their efforts? To what extent will the pandemic upend the region’s labor dynamics and social safety nets in the long term?

Santiago Levy, nonresident senior fellow at The Brookings Institution: “Informal workers are facing huge challenges in this pandemic, even ignoring issues of access to health services. If transmission rates are to diminish, they must stay home during the lockdown. But unless they are given some means of support during the lockdown, it is unlikely that they will comply, or at least that all will (unless tough and unwelcome policing measures are put in place). The state cannot ask someone to stay home and starve. Put differently, income transfers to these workers are an essential component of the strategy. Nothing relevant in the extremely short run will work very well, and rough-and-ready measures must be used to identify these workers and deliver them an income transfer: registries from health services (countries have publicly funded health programs for informal workers, parallel to those for formal workers), from municipalities, from tax authorities, and so on. Speed is of the essence, and precious time has already been lost. In parallel, during the pandemic, all available public health services should be used indistinctively for all workers; the formal-informal distinction should be irrelevant while the pandemic is controlled. Health services should be funded from general budget revenues. Once this is all over, the region will hopefully come to grips with the problem of informality. It is not a transitory nuisance, and it will not fade away with growth. The opposite is closer to the truth: unless it is tackled, there will be neither growth nor social inclusion.”

Betilde Muñoz-Pogossian, director of the Department of Social Inclusion at the Organization of American States: “The aftermath of Covid-19 for all economies will be appalling, but for those in Latin America and the Caribbean, it will be devastating. The pandemic’s impact on regional (and global) economic growth points to a recession, which will hit informal sector workers the hardest. Indeed, around 55 percent of the region’s working population does domestic work, construction, small retail and other informal jobs that have pretty much stopped amid social-distancing and quarantine measures. Countries have tried to provide agile and pragmatic responses, adopting measures ranging from ensuring food and medicines supply to the most affected people; freezing of payments for basic services and prohibiting suspension of these services for nonpayment; increased social spending through the expansion of direct monetary transfers to households without wages or to families in poverty; as well as the delivery of food to families and students who had access to adequate food only in schools. However, sooner rather than later, international financial institutions will need to step in to provide support to reactivate the regional economy. Women tend to be overrepresented in the informal sector. As they face the loss of income that allows them to provide for their families and themselves, they will experience the economic effects of the pandemic in the informal sector in a disproportionate way. At the same time, with the majority of the five million Venezuelan migrants settling in our own region, the economic effects of this pandemic will also affect their livelihoods, as more than half still remain in irregular status and mainly hold jobs in the informal sector. Their access to health, medicine and treatments, as well as economic subsidies for them and their families, should be central to governments’ responses to the pandemic.”

Sebastián Acha, executive director of PRO Desarrollo Paraguay and former member of Paraguay’s Chamber of Deputies: “The false dilemma that has been created regarding the fight against the pandemic is pretending to address life on the one hand and the economy on the other when it comes to determining different governments’ priorities. After almost a month of quarantine in Paraguay, we are starting to see the first signs that the isolation policy has begun to have a human face. There is a pressing need for generating income, a lack of health protection for informal workers and contradicting signals from the government when it comes to containing unemployment. The Paraguayan state has issued $1.6 billion in debt, with $300 million earmarked for unemployment benefits. As such, the state has demonstrated a lacerating truth: $200 million has been earmarked for the informal sector, while only $100 million will go to workers contributing to the pension system. There is no room for reproach, but there are lessons. Within the informal sector, the lack of data on who the beneficiaries are, and where they are, has delayed the effective delivery of the subsidy by 15 days. The lack of incentives to formalize, thanks to the bureaucracy that such a process entails, makes formal employers and employees resent that there is a greater allocation of resources to those who work outside the norms. The drag on Latin America’s economy continues to be informality. It is harshly punishing us during these moments for which we are never prepared, but for which we would have been at least protected had previous governments in the region responded to a call to reinforce formalization policies.”

Lauren M. Allen, associate attorney, and Audriana Rodriguez, law clerk, both at Diaz, Reus & Targ:The spread of Covid-19 has had wide-ranging effects on businesses and the working sector in Latin America and the Caribbean. But the informal sector, which does not receive the same employment security, health care and economic benefits that protect the formal sector, has suffered the most. Some governments have done their part to aid this vulnerable group. For example, El Salvador announced a freeze on mortgage and credit card debt payments for those affected by the global pandemic. The Salvadoran government also agreed to suspend utility, cable and Internet payments for three months. Similarly, Argentina, with some help from the United Nations, has implemented community kitchens and care centers, providing food and social protection support to approximately 200,000 vulnerable people. Other governments in the region, however, have not responded as quickly to protect groups such as the informal sector. The Mexican and Brazilian governments have been criticized for refusing to take proactive measures to stop the spread of the disease, while other countries, such as Venezuela, lack basic medicines and supplies to treat those infected with Covid-19. This problem, combined with its crippled health care system, makes it difficult for Venezuela to provide government assistance to its population, including the informal sector. The long-term effects of Covid-19 on the region’s labor dynamics largely depends on how long the pandemic persists. Nevertheless, Latin American countries need to take proactive legislative and policy decision measures in the near future to address the widespread inequality that will likely worsen in the coming months. With as much uncertainty as this virus brings, governments must act now so that their most vulnerable citizens are better able to protect themselves during future health crises.

Charles T. Call, associate professor of international relations at American University:Although Covid-19 has affected wealthy and mobile individuals more than the marginalized, in some countries the most marginal, especially the informal sector, is very likely to be affected in significant numbers. Three challenges are key: cash transfers, continued utility access and adequate access to hospitals for the seriously ill. Latin America has been slow to begin preparing enhanced medical facilities and equipment, and if the protective practices fail, then the consequences will be dire, especially in slums characterized by intimate close quarters and a lack of sufficient food and water to self-isolate for days. An excellent study by Blofield and Filgueira, ‘Covid-19 and Latin America,’ shows that 30 cash transfer programs across Latin America reached 130 million people in 2016, meaning that a platform for expanded cash transfers exists. And of nine countries examined, all have announced expanded cash transfers to the informal and poor sectors. Peru, Brazil and El Salvador are the most generous of these. The problem is that these transfers will need to be renewed (many are only single payments) and raised to meet the poverty level. Utilities will also need to enjoy a payment holiday for a longer period. The good news is that the cost of such cash transfer programs—for poor children—is affordable. Public pronouncements are as important as aid programs in motivating individual isolating behavior, and Brazil’s Bolsonaro and Mexico’s AMLO still are contradicting experts and sending unfortunate signals to their populations.”

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