Labour recovery

Several LatAm countries show job growth but the informal sector dominates.

On 14 April 2021, Fitch Ratings forecasted a 4.6% growth in Latin American GDP for 2021 following a 6.7% contraction in 2020 caused by the impact of the COVID-19 pandemic.

The region’s forecasts have recently improved mainly due to the stimulus packages approved in the US and China, the region’s main strategic partners, and higher commodity prices. However, Latin American countries will need structural reforms to stabilise economies and reduce public debt burdens to cement economic recovery.

The International Labour Organisation (“ILO”) has also called on regional governments to implement ambitious actions for the recovery of the labour market in 2021. The ILO estimates that the COVID-19 pandemic, coupled with pre-existing structural problems, resulted in the loss of 26 million jobs.

An executive at the Mexican employers’ association commented, “The amount of unemployment caused by the pandemic is huge and it will take at least two years to recover to pre-pandemic levels.”

“The amount of unemployment caused by the pandemic is huge and it will take at least two years to recover to pre-pandemic levels.”

Executive, Employers’ association, Mexico

Thus, the main risks in a post-pandemic job market in Latin America remain the same: informal labour and private sector investment.

The ILO estimates that informal labour represents 60% of total new jobs in the region. The employers’ association executive agreed, “What worries me is the growth of informality in all major cities, this is a problem for the state as these workers don’t pay taxes.”

An employment lawyer in Argentina painted a similar picture, “Most of the jobs recovered are informal with low wages which has a double impact on economic recovery – firstly there are no taxes paid and secondly, because the wages are low, benefits are being claimed.”

“Most of the jobs recovered are informal with low wages which has a double impact on economic recovery.”

Employment lawyer, Argentina

It is the same in Colombia according to a public policy expert, “Informal work in urban areas is growing faster than formal employment. We need to be careful in interpreting these data too, just because people have new income does not guarantee that they have better earnings.”

Growth in formal employment will also depend on private sector investments which, according to the Inter-American Development Bank (“IDB”), will be strongest in the energy and infrastructure sectors. Tourism and retail are expected to take longer to reactivate due to potential new COVID-19 waves and slow vaccine rollouts in some countries.

Important Notice
While the information in this article has been prepared in good faith, no representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or liability is or will be accepted by Deheza Limited or by its officers, employees or agents in relation to the adequacy, accuracy, completeness or reasonableness of this article, or of any other information (whether written or oral), notice or document supplied or otherwise made available in connection with this article. All and any such responsibility and liability is expressly disclaimed.
This article has been delivered to interested parties for information only. Deheza Limited gives no undertaking to provide the recipient with access to any additional information or to update this article or any additional information, or to correct any inaccuracies in it which may become apparent.

Most recent in Financials

Bolivia’s wallet is feeling light

Dollar shortages and policy reversals. 

Banking on it

Nubank is disrupting banking in Brazil and beyond.

Shallow Pockets

Cuba’s economic challenges (and there are plenty).

I wouldn’t bank on it 

Peru's economic landscape amidst interest rate cuts and uncertainties. 

Bolivia’s economic challenges 

Navigating political turmoil and market uncertainty. 

SoftBank’s Latin America investment strategy

Opportunities and challenges as investors divert their attention to LatAm.

From Global-isation to Local-isation

Nearshoring in Mexico and Central America.

Glimpses of hope

Argentina toils through economic turmoil with light at the end of the tunnel.

Desperate for dollars

Bolivia seeks to sell off remaining gold reserves to alleviate economic crisis.

Contagion risk

Is Latin America exposed to the recent banking turmoil in the US and Europe?