The employment situation in Latin America and the Caribbean: Crisis, stabilization and reactivation: performance of the labour market in 2009

Following a five-year period during which economic and social performance in Latin America and the Caribbean surpassed anything seen in recent decades, the global economic and financial crisis not only hurt macroeconomic variables but also impacted heavily on labour markets in the region’s countries. Between 2003 and 2008 employment rates had risen considerably, especially in the formal sector, but the crisis spelled a reversal of this trend. Nevertheless, the region was better prepared than it had been in previous crises, since it had achieved a sound fiscal footing, a good level of international reserves and low rates of inflation. This meant that the authorities had the space to implement countercyclical policies on both fiscal and monetary levels. Be this as it may, faced with the worst global crisis since the Great Depression of the 1930s, these measures could only attenuate the impact on the region’s economies —they could not prevent it altogether. Furthermore, the crisis struck with notable differences among subregions and countries depending on the nature of their trade integration, and not all the countries had the fiscal space to implement vigorous countercyclical policies. As discussed in this third ECLAC/ILO bulletin, the crisis did less damage to the region’s labour markets than had been feared at the beginning of last year, thanks to the implementation of public policies geared towards employment, as reviewed in the two previous bulletins. This bulletin offers an additional analysis from the perspective of gender equality. Moreover, some countries in the region, notably Brazil, managed to rapidly stabilize and revive economic growth, with positive effects on labour variables. The fact remains, however, that millions in Latin America and the Caribbean lost their jobs or were obliged to accept more poorly paid employment in more precarious conditions. The macroeconomic data indicate that recovery is under way and is stronger and occurring more rapidly than foreseen one year ago. In fact, regional growth in 2010 may well exceed the 4.1% forecast at the end of 2009. Consequently, although the unemployment rate may be expected to record a modest drop, it may not return to pre-crisis levels. The upturn is taking many different forms in the countries of the region. In some, especially in South America, recovery has benefited from the buoyancy of the Asian economies, whose demand for natural resources has driven large increases in exports, in terms of both volume and price. Countries whose economies are closely tied to the United States economy are benefiting from the recovery there, albeit more slowly and with a certain lag. Conversely, some countries are still suffering from major disequilibria, which are hampering their economic reactivation. Lastly, Chile and Haiti were both victims of devastating earthquakes early in the year and are therefore facing additional challenges associated with reconstruction, on top of their efforts to sustain an economic upturn. Despite the relatively favourable outlook for regional growth in 2010, great uncertainty still surrounds the global economy’s recovery, which affects the region’s economic prospects over the longer term. The weakness of the recovery in some regions and the doubts about its sustainability in others, as well as shocks that have occurred in international financial markets, are warning signs which authorities need to monitor continuously because of the region’s close integration with the global economy. In addition, a return to growth does not directly or automatically mean higher employment rates —still less decent working conditions. Although some labour indicators have performed reasonably favourably since the end of last year, the countries still face daunting challenges in improving the labour market integration of millions in Latin America and the Caribbean who are not seeing the fruits of renewed growth. This is why it is important to learn the lessons arising from the policies implemented during the crisis to offset its impact on labour markets. With this third joint bulletin, ECLAC and ILO continue to pursue their objective of affording the region the information and analyses needed to face these challenges, as regards both trends in the region’s labour markets and the corresponding policy options.

The employment situation in Latin America and the Caribbean: Crisis in the labour markets and countercyclical responses

As predicted in the first bulletin, produced jointly by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO), the impact of the economic crisis continued to be felt in Latin America and the Caribbean during the second quarter of 2009. Regional exports of goods and services contracted in response to sluggish demand on international markets, while remittances and foreign direct investment flows continued to fall, credit lost its buoyancy and the total wage bill diminished, owing mainly to job losses. As a result, the growth forecasts of many countries had to be adjusted downwards. Since the end of 2008, the countries of the region had started to implement countercyclical policies —albeit with significant differences— in an effort to use public spending to counter flagging investment and consumer-spending levels and boost aggregate demand. In this second bulletin, ECLAC and ILO show how the impact of the crisis has deepened in labour markets in the region in the first half of the year and examine existing options and the outcome of public-infrastructure and emergency employment programmes designed to mitigate the impact of the crisis on the labour market. The unemployment rate has risen in practically all countries compared with the previous year and this situation worsened further in the second quarter, when urban unemployment exceeded the rate of the corresponding period in 2008 by 1 percentage point (to stand at 8.5%, up from 7.5%), while in the first quarter, the variation was 0.6 of a percentage point. Labour indicators also point to an increase in informality, a decline in employment with social protection and a decrease in full-time employment. Labour-market trends observed in the first half-year, together with the forecast for a 1.9% decline in regional GDP in 2009, suggest that the average annual rate of urban unemployment in the region will be close to 8.5%. This forecast is slightly less pessimistic than the estimate given in the first bulletin; this is attributable to the fall in the participation rate in the first half-year to levels that are expected to remain low for the rest of the year. Without this reduction in the labour supply, due largely to the “discouragement effect”, the annual average urban unemployment rate would stand at between 8.8% and 8.9%. Thus, the open urban unemployment figure would increase by 2.5 million and if the “discouraged job-seekers” are included, then the number of additional persons not finding a niche in the urban labour market would climb to 3.2 million. In the region, as in the rest of the world, there are signs that the crisis may have reached bottom in the middle of the year. In many countries, production levels have ceased their decline and there are indications of an incipient recovery leading to cautious optimism that there may be a moderate upturn in labour markets in the fourth quarter. The pace of recovery will vary from one country to the next and is expected to be gradual at best. Even with the return to a growth path, there should be no illusion that the labour problems will immediately disappear. First, the recovery in employment is expected to lag behind the upturn in economic activity. Second, since economic growth is likely to remain moderate in the short term and well below the rates recorded between late 2003 and mid-2008, demand for labour and consequently the generation of good-quality jobs will continue to be weak. Thus, countries should not relax their efforts to defend and create decent jobs, but rather should take steps to improve the effectiveness and efficiency of available instruments. In this way, the region will be in a better position not only to confront the challenges of economic recovery, but also to strengthen the foundations for social inclusion and for advancing under more favourable conditions towards fulfilment of the Millennium Development Goals.

An assessment of the economic impact of climate change on the water sector in Saint Vincent and The Grenadines

Water security which is essential to life and livelihood, health and sanitation, is determined not only by the water resource, but also by the quality of water, the ability to store surplus from precipitation and runoff, as well as access to and affordability of supply. All of these measures have financial implications for national budgets. The water sector in the context of the assessment and discussion on the impact of climate change in this paper includes consideration of the existing as well as the projected available water resource and the demand in terms of: quantity and quality of surface and ground water, water supply infrastructure - collection, storage, treatment, distribution, and potential for adaptation. Wastewater management infrastructure is also considered a component of the water sector. Saint Vincent and the Grenadines has two distinct hydrological regimes: mainland St Vincent is one of the wetter islands of the eastern Caribbean whereas the Grenadines have a drier climate than St Vincent. Surface water is the primary source of water supply on St Vincent, whereas the Grenadines depend on man-made catchments, rainwater harvesting, wells, and desalination. The island state is considered already water stressed as marked seasonality in rainfall, inadequate supply infrastructure, and institutional capacity constrains water supply. Economic modelling approaches were implemented to estimate sectoral demand and supply between 2011 and 2050. Residential, tourism and domestic demand were analysed for the A2, B2 and BAU scenarios. In each of the three scenarios – A2, B2 and BAU Saint Vincent and the Grenadines will have a water gap represented by the difference between the two curves during the forecast period of 2011 and 2050. The amount of water required increases steadily between 2011 and 2050 implying an increasing demand on the country‘s resources as reflected by the fact that the water supply that is available cannot respond adequately to the demand. The Global Water Partnership in its 2005 policy brief suggested that the best way for countries to build the capacity to adapt to climate change will be to improve their ability to cope with today‘s climate variability (GWP, 2005). This suggestion is most applicable for St Vincent and the Grenadines, as the variability being experienced has already placed the island nation under water stress. Strategic priorities should therefore be adopted to increase water production, increase efficiency, strengthen the institutional framework, and decrease wastage. Cost benefit analysis was stymied by data availability, but the ―no-regrets approach‖ which intimates that adaptation measures will be beneficial to the land, people and economy of Saint Vincent and the Grenadines with or without climate change should be adopted.

An assessment of the economic impact of climate change on the tourism sector in Aruba

In this study, an attempt is made to assess the economic impact of climate change on Aruba. This study has three main objectives. The first is to examine the factors that influence the demand and supply of tourism in Aruba. The second is to forecast the cost of climate change to the tourism sector until 2050 under the A2 and B2 climate scenarios with the Business as Usual (BAU) as a comparator climate scenario, and the third is to estimate the cost of adaptation and mitigation strategies that can be undertaken by Aruba to address climate change in the tourism sector.

An assessment of the economic impact of climate change on the tourism sector in Curacao

In this study, an attempt is made to estimate the economic impact of climate change on the tourism sector in the (former) Netherlands Antilles. There are three main objectives in this study. The first is to examine the factors that influence the demand and supply of tourism in Netherlands Antilles. The second is to forecast the cost of climate change to the tourism sector until 2050 under the A2 and B2 climate scenarios with the (Business as Usual) as a comparator climate scenario, and the third is to estimate the cost of adaptation and mitigation strategies that can be undertaken by the tourism sector in the Netherlands Antilles to address climate change.

Do demand and profitability stimulate capital accumulation? An analysis for Brazil

This article tests whether the profit share of gdp and capacity utilization affect capital accumulation in Brazil in the period 1950-2008 (in the sense of Granger causality). The methodology developed by Toda and Yamamoto (1995) is used to verify the Granger non-causality hypothesis. The results show that capacity utilization “Granger-causes” capital accumulation in the Brazilian economy and, also that the profit share of gdp does not “Granger-cause” the national investment-capital ratio. This corroborates the Kaleckian proposal based on the fundamental role of the accelerator, and suggests that the Brazilian economy can grow with either a concentration or a de-concentration of income, provided a suitable institutional arrangement is in place.

Towards a demand model for maritime passenger transportation in the Caribbean: a regional study of passenger ferry services

In this paper, the main factors that influence the demand for maritime passenger transportation in the Caribbean were studied. While maritime studies in the Caribbean have focused on infrastructural and operational systems for intensifying trade and movement of goods, there is little information on the movement of persons within the region and its potential to encourage further integration and sustainable development. Data to inform studies and policies in this area are particularly difficult to source. For this study, an unbalanced data set for the 2000-2014 period in 15 destinations with a focus on departing ferry passengers was compiled. Further a demand equation for maritime passenger transportation in the Caribbean using panel data methods was estimated. The results showed that this demand is related to the real fare of the service, international economic activity and the number of passengers arriving in the country by air.

Meta-analysis of the income and price elasticities of gasoline demand: public policy implications for Latin America

By means of a meta-analysis, this article sets out to estimate average values for the income and price elasticities of gasoline demand and to analyse the reasons for the variations in the elasticities reported by the literature. The findings show that there is publication bias, that the volatility of elasticity estimates is not due to sampling errors alone, and that there are systematic factors explaining these differences. The income and price elasticities of gasoline demand differ between the short and long run and by region, and the estimation can appropriately include the vehicle fleet and the prices of substitute goods, the data types and the estimation methods used. The presence of a low price elasticity suggests that a fuel tax will be inadequate to control rising consumption in a context of rapid economic growth.