Wednesday 22 September 2021

Biggest Problem for Latin America Development Is Growing Informal Economy

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Women Eke Out a Living in Informal Economy
Women Eke Out a Living in Informal Economy

LATIN AMERICA NEWS — The worst problem currently facing the development of Latin American countries is the growth of the informal economy, a Columbia University professor said at an international seminar.

“Where the region is particularly weak is in labor matters, due to the poor capacity for creating jobs and the incapacity to comply with existing legislation,” Jose Antonio Ocampo, who was head of the Economic Commission for Latin America and the Caribbean between 1998 and 2003, said.

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“The problem in our region isn’t poverty but the poor distribution of revenues, to which must be added a social stratification that leads to certain policies for the rich and others for the poor,” the professor in Columbia’s School of International and Public Affairs said.

The fact is, according to Professor Ocampo, that in Latin America there really has not been a lost decade but an entire quarter of a century lost – from 1980 up to 2004.

At this Friday’s closure of the “Social Innovation in Latin America” seminar organized by ECLAC and the Institute of the Americas, Ocampo said “it is necessary to set better social goals in the design of economic policy and not just in the design of social policy.”

“Redistribution is potentially a more efficient way to reduce poverty than growth,” but in spite of that “governments of the region have not explicitly incorporated it into their public policies.”

Ocampo, a 58-year-old native of Cali, Colombia, recalled that in the last two decades, public social expenditures in Latin America have gone from 12.8 percent to 17.4 percent of gross domestic product, a phenomenon that in his opinion constitutes “the chief dividend of democracy.”

“The region’s efforts to improve social expenditure have been notable and generalized. And this great progress has occurred precisely in countries that were previously low in social expenditure,” Ocampo, Colombia’s finance minister from 1995 to 1998, said.

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The indicators of human development show a certain lagging behind during the so-called “lost decade,” followed by rapid progress, a notable acceleration in the last 10 years.

The areas where advances have been made include health care, nutrition and primary and secondary education, even though insufficient progress has been made in educational quality, potable water and sewage systems in rural areas.

“But the economic system has not always been helpful,” Ocampo said.

There have been two very different cycles, one with a marked deterioration in jobs and income distribution in the period between 1990 and 2003, and another of improvement, as reflected in the economic boom between 2004 and 2008.

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Of all the countries in Latin America, only one – Chile – improved its economic indicators between 1990 and 2007 in terms of employment, the informal economy, wages and social security coverage.

“The basic problem is that human development comes up against labor instability and economic insecurity,” the reason why Ocampo argues that the creation of formal jobs should be made the core of economic policy.


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