Working in Latin America

Workers' protest, La Paz, Bolivia (photo credit: Pablo Verdin)

Today, in much of Latin America, the dominant economic paradigm is neo-liberalism.  This particular line of thinking is a reaction to the preceding paradigm known as 'Import Substitution.'  Previously, the perceived problem was the dependency of Latin Americans upon the unpredictable demands of the First and Second World nations.  For example, countries that were overly dependent upon the export of commodities such as tin and copper have found themselves in dire straits due to drops in prices and/or demand but were nevertheless dependent on imported manufactured goods such as automobiles.  During the era of Import Substitution, many countries applied their national resources to develop core industries such as automobile manufacturing, which would reduce their dependency upon imports as well as drive their own internal economies.

Import Substitution came under fire for leading many Latin American countries into debt crises, as the money borrowed to start these Import Substitution industries could not be repaid from the revenues from these industries.  The neo-liberals held that the problem was that there was too much state intervention in developing national industries that were inefficient and non-competitive and the required overspending led to runaway inflation.  

The neo-liberal solution to these problems attempts to address the philosophical roots.  The actual steps were somewhat different across countries, since what is needed and what is possible depends on many situations (e.g. the amount of the external debt, the nature and state of the economy, the principal assets of the country, etc) and many players (e.g. government officials, unions, the lending banks, academic theoreticians, the International Monetary Fund, the World Bank, and even the electorate).  Usually, they involve these two aspects  ---

• Stabilization --- Stabilization refers to the immediate task of curbing inflation (which was as high as several thousand percent per year in some Latin American countries), and is achieved by several measures: reducing public spending, raising interest rates, strengthening the national currency and imposing wage and price controls.
   

• Structural adjustment --- The economy is restructured by removing state intervention in the national economy and letting free-market mechanisms determine the optimal allocation of resources.  This is achieved by several measures: the removal of labor and business regulations to encourage economic growth, the reduction or removal of protective tariffs to promote free trade and the privatization of state-owned industries (such as telecommunications) to raise cash as well as inject competition.

This is not the place for us to evaluate the success/failure of neo-liberalism as a whole.  Still, it should be clear that structural adjustment implies a radical transformation of the economy achieved within a short time frame, which is sometimes called a shock.  The re-allocation of resources means that some sectors of the economy will shrink even as others expand.  Thus, in the post-NAFTA era, the traditional maize growers in Mexico found themselves unable to compete in the open market against the large mechanized North American farms which are several times more productive; correspondingly, the Latin American countries were booming in maquiladoras because they had an abundant supply of cheap labor; or, as Ross Perot chooses to describe it, there was the 'giant sucking sound' of North American manufacturing jobs heading south.

Under any re-allocation process for a complex economy, there is unlikely to be a Pareto-optimal solution in which everybody does no worse than before.  Rather, in all likelihood, some people will do better and other people will fare worse than before.  When an economic shock is applied, the quickest and biggest impact appears in the form of rising unemployment, as when governments reduces their sizes and expenditures, privatized firms streamline their operations, private companies replacing union workers with non-union people, companies going out of business because of foreign competition, etc.  Job elimination simply happens a lot faster than job creation.

We will now cite some survey data from the 1999-2000 TGI Latina study.  This is a consumer survey of 46,244 persons between the ages of 12 and 64 years old in seven Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela.  From this study, the employment statistics are:  40% of the respondents have full-time employment (that is, working 30 hours or more per week), 6% are unemployed and currently looking for work, 1.4% are unemployed but are currently not looking for work.  The following table breaks these numbers out by demographic characteristics.

(source:  TGI Latina)

There is a gender gap in labor participation in Latin America.  More men are employed than women; for example, 81% of men 35-44 years old are working full time, versus 36% of women in the same age bracket.  Conversely, more women than men are unable to find jobs; for example, 10% of men 20-24 years old cannot find jobs, versus 12% of women in the same age bracket.  

Labor participation is also an increasing function of socio-economic level.  The more affluent people are more likely to be working, and the less affluent are more likely to be unemployed.  This is rather unfortunate, as the poor are more vulnerable because they are less likely to possess the means (such as savings, credit and loan collaterals) to smooth out the effects of unemployment and have to endure cuts in consumption that have long-term deleterious effects.  

Here, we must point out that there are number of definitional issues related to the notions of employment and unemployment.

• For us, 'full-time employed' means working thirty hours or more a week.  This definition makes no distinction between a contracted union job paying guaranteed steady wages versus a temporary day-to-day job from which one can be fired at will.  It covers well-educated, white-collar professionals working for high-paying multinational corporations as well as unskilled laborers working for below-subsistence wages in the informal sector.

• 'Full-time employed' includes also various forms of underemployment, such as full-time government employees who have nothing to do, are not paid enough and need to have additional jobs (such as driving taxis).

• Under 'unemployed' are categories such as housewives (ama de casa), students and retired persons.  Housework is a gray area in that it is not considered work when the housewife performs it but it is considered work when a domestic worker is hired to perform the same duties.

An unemployed person faces an uncertain future.  The loss of that income erodes consumer confidence.  In the following table, we show the consumer confidence index by the different employment/unemployment categories.  There is clearly significantly less confidence among the unemployed persons.  

(source:  TGI Latina)

As we have shown in a previous note (Consumer Confidence and Spending Behavior), consumer confidence is positively correlated with consumption.  For the poor, normal consumption is already close to the minimal subsistence levels.  Further reduction in food consumption may lead to higher levels of malnutrition, which may cause serious damage to long-term health and earnings potentials.  Reduction in schooling, either because they could not afford the direct and indirect costs or because the children must enter the labor force to earn money too, will mean lesser opportunities later in life.

While the economic, social and political effects are somewhat understood, the psychological injuries of unemployment are often taken for granted or hidden from public view because they are too embarrassing to discuss.  In the following table, we show a list of attitudinal statements tabulated by the employment/unemployment categories.  What do we see for the jobless ones?  Feelings of anxiety, isolation, disappointment, unhappiness, inadequacy, helplessness,  ...

(source:  TGI Latina)

In a perfect world, a person who wishes to earn money by performing honest work should be given the opportunity to do so.  Nobody should have to suffer the indignities and injuries of unemployment.  Unfortunately, under neo-liberalism, full employment is in fact unacceptable since there must be a reserve labor pool to ensure efficient and time allocation of resources.

ZONA LATINA ARTICLES

• Consumer Confidence in Latin America   (11/29/96)  1995 consumer confidence indices in 19 Latin American countries (data source: Los Medios y Mercados de Latinoamérica)
• Consumer Confidence and Spending Behavior (10/6/97)  How consumers' confidence in their financial situation affects their discretionary expenditures (data source: Los Medios y Mercados de Latinoamérica)
• The Prospect of Being Unemployed in Latin America (11/03/00)  Latin Americans worry about losing their jobs (data source: Los Medios y Mercados de Latinoamérica)

BOOKS

• Charles Bergquist.  Labor in Latin America: Comparative Essays on Chile, Argentina, Venezuela, and Colombia.  Stanford University Press: Palo Alto.  1986.
• Joseph Collins and John Lear.  Chile's Free Market Miracle: A Second Look.  Food First Books: Oakland, CA.  1995.
• John C. Cross.  Informal Politics: Street Vendors and the State in Mexico City.  Stanford University Press: Palo Alto, CA.  1998.
• Economic Commission for Latin America and the Caribbean.  Part Time Work in Chile: Is it Precarious Employment? Reflections from a Gender Perspective.  United Nations.  2000.
• Hernando de Soto.  The Other Path: The Invisible Revolution in the Third World.  Harper Row: New York, NY.  1989.
• Sebastian Edwards.  Crisis and Reform in Latin America: From Despair to Hope.  Oxford University Press: New York.  1995.
• Sebastian Edwards and Nora Lustig (eds).  Labor Markets in Latin America: Combining Social Protection with Market Flexibility.  Brookings Institute: New York.  1997.
• Ann Farnsworth-Alvear.  Dulcinea in the Factory:  Myths, Morals, Men and Women in Colombia's Industrial Experiment, 1905-1960.  Duke University Press: Durham, NC.  2000.
• John D. French.  The Brazilian Workers' ABC: Class Conflicts and Alliances in Modern São Paulo.  University of North Carolina: Chapel Hill.  1992.
• Duncan Green.  Silent Revolution: The Rise of Market Economics in Latin America.  Cassell: London, UK.  1995.
• Inter-American Development Bank.  Economic and Social Progress in Latin America: 1995 Report.  Overcoming Volatility.  Distributed by The Johns Hopkins University Press: Baltimore, MD.
• Jorge A. Lawton (ed).  Privatization Amidst Poverty: Contemporary Challenges in Latin American Political Economy.  North-South Center Press: Miami, FL.  1995.
• Nora Lustig (ed)  Coping with Austerity: Poverty and Inequality in Latin America.  The Brookings Institution: Washington, DC.  1995.
• June Nash.  We Eat the Mines and the Mines Eat Us:  Dependency and Exploitation in Bolivian Tin Mines.  Columbia University Press:  New York, NY.  1979.
• Jorge Parodi.  To Be A Worker: Identity and Politics in Peru.  University of Carolina: Chapel Hill, NC.  2000.
• Devon Gerardo Pena.  The Terror of the Machine:  Technology, Gender, and Ecology of the U.S. -Mexico Border.  University of Texas: Austin.  1997.
• Norma Iglesias Prieto.  Beautiful Flowers of the Maquiladora:  Life Histories of Women Workers in Tijuana.  University of Texas Press: Austin, TX.  1997.
• Satya R. Pattnayak.  Globalization, Urbanization, and the State : Selected Studies in Contemporary Latin America,  University Press of America.  1996.
• Alison MacEwan Scott.  Divisions and Solidarities:  Gender, Class and Employment in Latin America.  Routledge: London, UK.  1995.
• Barbara Stallings and Wilson Peres.  Growth, Employment, and Equity : The Impact of the Economic Reforms in Latin America and the Caribbean.  Brookings Institution Press/Inter-American Development Bank. 2000.
• Richard Tardanico and Rafael Menjívar Larín (eds).  Global Restructuring, Employment, and Social Inequality in Urban Latin America.  North-South Center Press: Miami, FL.  1997.
• Rosemary Throp.  Progress, Poverty and Exclusion: An Economic History of Latin America in the 20th Century.  Inter-American Development Bank: Washington, DC.  1998.

(posted by Roland Soong on 9/07/00)

(Return to Zona Latina's Home Page)