(May 22, 2014) The economic scenario in 2014, with an estimated growth rate of 2.7%, is far from auspicious for the evolution of the regional labor market and presents major challenges for labor market policy, said the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO) in a new joint report released today.
“Given the modest economic growth projected for the region in 2014 and current labor participation trends, a slow pace of employment creation is forecast, which means there will likely be no significant variations in the unemployment rate,” said the United Nations organizations in the latest edition of the report The employment situation in Latin America and the Caribbean.
ECLAC and ILO added that if the reduced economic dynamism translates into higher unemployment in some countries, it will be important for them to have unemployment insurance and other protective measures so they can confront this scenario.
The new edition of The employment situation in Latin America and the Caribbean takes stock of the labor markets during 2013 and emphasizes that despite the reduced economic dynamism and a minor drop in the employment rate, the unemployment rate kept falling between 2012 and 2013 and hit its lowest level in decades (6.2%).
Nevertheless, “there are doubts about the sustainability of this positive development in the near future,” the document insists.
According to the report, the weakness of economic growth was already evidenced in 2013 by cooling labor demand. In addition, salaried work grew at lower rates than in previous years, resulting in a slight decline in the employment rate. A positive development was that during 2013 the gap between men and women decreased in terms of participation, employment and unemployment, although significant differences persist and require additional efforts to achieve gender equality in the working world.
Young people were the most affected by the loss of labor dynamism since their unemployment rose between 2012 and 2013 to 14.3% from 14.0% -in contrast to adults,whose unemployment rate was 3.2 times lower- as a consequence of a notable fall in their employment rate (which was steeper than the decline in their labor participation).
In 2014 the region’s countries must make efforts to advance in the creation of quality jobs and, more specifically, to promote the productive labor incorporation of youth.
The joint ECLAC-ILO document also indicates that in addition to job creation in the last decade, the strengthening of social safety nets and the introduction of new social programs were important factors in reducing poverty. Among these, the conditional cash transfer programs stood out, benefiting 21% of the regional population.
These programs, by giving more liquidity to families, allow them to make better labor decisions with respect to their employability in dignified and equitable conditions and can contribute to creating a “virtuous cycle” of generating autonomous income on the part of the poorest and most vulnerable groups.
Nevertheless, the organizations warn that the transfer programs must be closely coordinated with comprehensive social protection systems and active labor market policies to ensure that “graduating” from these programs does not lead to a loss of rights for the families or to labor informality.
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The foreign trade performance of Latin America and the Caribbean reflects the weak global economy. Regional export values are expected to grow by just 1.5% in 2013 (3% in volumes and -1.5% in prices) – which is similar to the 1.4% growth observed in 2012. Meanwhile, imports are expected to expand by 4.5%, which will bring the region’s trade surplus down to 8.0 billion dollars in 2013 (compared to 41.0 billion dollars in 2012), according to estimates presented today in Santiago in a new report from the Economic Commission for Latin America and the Caribbean (ECLAC).
In its annual report, Latin American and the Caribbean in the World Economy 2013, the Commission states that the weak global economy continues to affect the buoyancy of world trade. The latter is expected to grow by around 2.5% in volume in 2013. This would mean trade growing more slowly than global GDP for the second year in a row – which has not been seen since the 1980s.
Mexico and Central America, which export mainly to the United States, are predicted to benefit from the emerging recovery in that country. However, limited European growth will slow exports from some South American countries that focus on that particular market.
Latin American and Caribbean countries whose exports are mainly to China and the rest of Asia will probably chalk up higher volume growth, while at the same time experiencing a gradual change in demand from commodities to more processed products.
In terms of countries, Paraguay and Uruguay show the largest increases in export values in 2013 (33% and 14%, respectively), and this was largely due to considerable export growth in soybean and meat exports. In contrast, some of the region’s countries are seeing their export values fall, such as Peru (-9,7%) and Guatemala (-5%). Mexico, the region’s top exporter, will see export growth of almost 3%. Brazil, the region’s second main exporter, will see a standstill in exports.
The document also shows gains in the region’s terms of trade between 2004 and 2011, which accounted for almost half of growth in gross national income in Chile (47%), as well as major contributions in Ecuador (35%), Mexico (27%) and Brazil (22%). These figures show an excessive dependence on the cycle of international commodity prices (a crucial feature of the region’s development).
Mega-agreements can change the international rules
In the report, ECLAC states that one of the main features of the current international economic situation are mega-regional negotiations linking the main world production networks: Europe, North America and Asia.
Several mega-regional negotiations under way are changing the face of world trade. Some of the main examples include the Trans-Pacific Partnership Agreement (TPP), the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States, the Regional Comprehensive Economic Partnership (RCEP) (involving the 10 ASEAN members, and Australia, China, India, Japan, New Zealand and the Republic of Korea) and the free trade agreements between China, Japan and the Republic of Korea, and between the European Union and Japan. All of these initiatives aim to create large economically integrated spaces at the regional level (in Asia), as well as at the trans-Atlantic and trans-Pacific levels.
These mega-negotiations include topics that are not regulated by the World Trade Organization and that are important for international production networks. The agenda is becoming increasingly sophisticated, with a view to harmonizing the operating rules of various production networks to facilitate the operations of multinationals in North America, Europe and Asia.
Mega-regional negotiations under way will probably have considerable impact on the geographical distribution and governance of world trade and investment flows over the next few years. The scale of these initiatives could result in a redefinition of the rules of international trade by 2020. To date, this redefinition has taken place on the periphery of the WTO, and without tackling some of the pending issues on the trade agenda that are the most interesting to developing countries.
According to the document, as well as diverted trade and investment flows, these negotiations could result in the region’s countries facing restricted access to knowledge and innovation opportunities provided by new technologies, if the positions of the lobbies observed so far in the main economies prevail.
Mega-regionalism poses the challenge of improving the international economic standing of the region’s countries, which would help to produce subregional value chains and progress towards plurinational industrial policy practices. The document therefore examines the potential of some subregional production networks, as well as suggesting policies that place learning about clusters and new-wave industrial policies at the heart of regional integration.
(28 May 2013) According to a new ECLAC document launched today, Latin American countries must review and strengthen the institutions and instruments in order to maximize the contribution of natural resources to regional development, particularly in the current cycle of high prices.
The report Natural resources within the Union of South American Nations: Status and trends for a regional development agendawas presented by Antonio Prado, Deputy Executive Secretary of this United Nations regional commission, at the Conference of the Union of South American Nations on Natural Resources and Integral Development in the Region, which is being held until 30 May in Caracas, Venezuela.
In the document, ECLAC analyses the issue of natural resource governance in the region, which refers to the set of sovereign policies over ownership and allotment of natural resources and the distribution of productivity gains arising from their exploitation.
Latin America and the Caribbean has 65% of the world’s reserves in lithium, 42% of silver, 38% of copper, 33% of tin, 21% of iron, 18% of bauxite and 14% of nickel. It also has large oil reserves: a third of world bioethanol production, almost 25% of biofuels and 13% of oil.
The region has around 30% of the world’s total renewable water resources, which represents over 70% of the water throughout the Americas, as well as having 21% of the planet’s forests and plentiful biodiversity.
However, the region has major weaknesses, such as production and export structures based on static comparative advantages (based on natural resources alone) rather than dynamic competitive advantages; low investment in infrastructure, exploration and value added; and poor performance in innovation, science and technology.
According to Antonio Prado “Historically, the region has been unable to translate the boom periods of exporting its resources into long-term economic development processes. The challenge for the countries of the region is to generate and efficiently invest extraordinary revenue from the current price cycle with social and environmental sustainability”.
In the new report, ECLAC describes the various legal and economic instruments that Latin American and Caribbean States have at their disposal to appropriate and distribute the revenues from the exploitation of natural resources relating to mining, water and hydrocarbons.
In terms of mining, ECLAC states that four UNASUR countries (Argentina, Brazil, Chile and Peru) receive 62% of regional investment in exploration (and according to 2010 data the percentage climbs to 84% if Mexico is added).
In 2011, Brazil, Chile and Peru were among the top 10 recipients of mining investment, accounting for 36% of the world total (compared to 26% in 2000).
Between 2000 and 2010, the region’s oil exports did not follow the upward trend of prices, unlike the pattern in the rest of the world. Despite this, estimated income of the hydrocarbons sector during the boom of 2004-2009 (7.1% of GDP) was double the average recorded between 1990 and 2003 (3.6% of GDP).
ECLAC also states that UNASUR has a primary energy supply structure that is cleaner than the world average (31% compared with 12%), as it combines energy sources such as hydroelectricity, biomass and other renewables. In 2011, for instance, hydroelectricity represented 11% of these countries’ total primary energy supply (which is much higher than the world figure of 2%).
The Commission describes the region as facing the challenge of achieving homogenization and integration in energy consumption, with a view to narrowing the subregional divides that still persist, namely: the heterogeneity of natural resources, supply structures and energy consumption, and the need to achieve institutional consolidation and establish the basic conditions for renewable energy promotion and penetration policies.
According to ECLAC, the subregion’s public policies should take a long-term view on the need to ensure efficient investment of the windfall earnings from natural resources now that prices are buoyant, as well as on the need to improve public management of socioenvironmental conflicts that arise in the development of natural resource sectors.
The Statistical Yearbook for Latin America and the Caribbean seeks to respond to the demands of users who require reliable and sound statistical information in order to analyse the economic, social and environmental situation of the region. This year’s edition includes information available up to mid-December 2012.
This edition of the Statistical Yearbook is similar in structure to the 2011 edition as no significant changes have been made in terms of content or design. The Yearbook comprises four chapters. The first covers demographic and social indicators and continues to reflect special efforts to mainstream the gender perspective in statistical information and to encompass poverty-related topics. The second chapter presents economic statistics relating to trade, the balance of payments and domestic prices, as well as national accounts. The statistical series are expressed in domestic currency and constant dollars. The third chapter provides the quantitative information available on the environment. Here, priority is given to data from international sources. The electronic version also includes the data available and compiled by the Economic Commission for Latin America and the Caribbean (ECLAC) for this chapter.
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This publication is a contribution by the Economic Commission for Latin America and the Caribbean (ECLAC) to the analysis of trade and investment relations between the United States of America and Latin America and the Caribbean, on the occasion of the visit of President Barack Obama to Brazil, Chile and El Salvador in March 2011.
The early years of this new decade have brought good news for Latin America and the Caribbean. The region weathered the international crisis with unprecedented resilience and emerged from it sooner and more strongly than the developed economies. It grew by 6% in 2010, and is expected to grow by over 4% in 2011. The region’s economic reforms of past decades, its fiscal and macroeconomic prudence and its sound financial supervision, together with ever closer commercial ties with China and other emerging economies, have allowed it not only to successfully navigate through the worst international crisis of the past 80 years but also to enter the new decade with a promising outlook for growth and advances in quality of life. For the first time in its history, the region achieved during the past decade a combination of high growth, macroeconomic stability, poverty reduction and improvement in income distribution. On the strength of the foregoing and of its privileged endowment in natural resources, energy, water and biodiversity, the Latin American and Caribbean region will be called upon to assume an increasingly larger role in the global economy. At Davos and other specialized forums, it has been said that this could be the decade of the Latin American and Caribbean region and that, with regard to global economic recovery, the region is today firmly part of the solution.
The region’s resilience to, and strong recovery from, the international financial crisis have renewed the interest of the European Union in strengthening linkages with it. At the same time, the Asia-Pacific region ?particularly the People’s Republic of China? has become a privileged trading partner for Latin America and the Caribbean. These closer trade and investment links have been both a cause for and a result of the increasing number of trade agreements already in force or under negotiation that link various countries of the region with the European Union and Asia-Pacific.
In this context of special opportunities and diversification of trading partners, the share of the United States of America in the region’s trade has been shrinking. More importantly, there is a perception in Latin America and the Caribbean that the United States lacks strategic vision vis-à-vis the region. In past decades, the Alliance for Progress, the Initiative for the Americas and, later, the Free Trade Area of the Americas (with which ECLAC, the Inter-American Development Bank and the Organization of American States collaborated through the Tripartite Committee) were all ambitious United States initiatives for regional cooperation. Today no such initiatives exist.
Despite recent improvements on many fronts, the Latin American and Caribbean region faces some formidable structural challenges. It still has the highest indices of inequality in the world, as well as serious lags in technology, innovation and competitiveness. Nevertheless, the region, together with its main partners, is approaching these challenges as opportunities for new partnerships that promote growth and development through increased trade and investment. The United States can and should be an active partner of the region in this endeavour.
The visit of President Obama to three Latin American countries provides the United States with a unique opportunity to revitalize hemispheric relations. It could do so by presenting proposals for a strategic dialogue and for new hemispheric initiatives in trade and investment to strengthen cooperation between the United States and the region.