Economy & Trade, Financial Crisis, Headlines, Labour, Latin America & the Caribbean

BRAZIL: “Employment Crisis Is Over” – Labour Minister

Mario Osava

RIO DE JANEIRO, Apr 14 2009 (IPS) - The effects of the economic recession on employment in Brazil have already been overcome, Labour and Employment Minister Carlos Lupi said, citing statistics that show more hirings than firings since February.

The worst impact of the global financial crisis on Brazil’s labour market occurred in December, with the net loss of 655,000 formal sector jobs, the minister told foreign correspondents at a press conference Monday.

Effects had been felt since October, putting an end to a period of strong growth in formal employment that began in 2004. During the first nine months of 2008, jobs grew by 2.09 million, a monthly average of 231,888.

An upsurge in lay-offs, mainly due to the fall in industrial production and exports, began in October. In November, the Labour Ministry’s General Registry of Employed and Unemployed (CAGED) recorded the first negative result of the year, with a net loss of 41,000 jobs.

December is usually a month with a lot of dismissals as temporary work contracts, particularly in sales during the year-end holiday period, expire. But in December 2008 job losses were more than double those of previous years.

There was still a net employment loss in January, but it was much smaller at 102,000 jobs, and in February there were 9,000 more jobs created than lost, a small net gain indicating a turning point in the trend, which was accentuated in March, figures for which are not yet complete, Lupi said.

As well as the figures showing the trend, the fall in applications for unemployment insurance and the hiring of workers in sectors like construction, education, health and other services demonstrate that “the crisis is over” in the labour market, the minister said.

The unemployment rate rose to 8.2 and 8.5 percent in January and February, respectively, after holding steady for several months at an average of around 7.5 percent in this country of 190 million people, according to the Brazilian Institute of Geography and Statistics (IBGE).

But these indices are compiled from surveys, usually carried out in metropolitan areas, so Lupi prefers the absolute numbers of employed people provided by his ministry, which he said are “more concrete” and show trends more clearly.

However, Brazilian industry is still undergoing serious consequences from the global crisis. Steel production in the first two months of this year was down by 42.4 percent on the same period in 2008, according to statistics from the Brazilian Steel Institute (IBS).

The recovery of mining, steel and other sectors that depend heavily on exports is being delayed, Lupi admitted, because the stockpiles of excess production accumulated over the last several months will only be used up over the months to come, depending on external markets. Meanwhile, production remains low.

A similar dynamic was seen in the automotive industry, which was hit hard by the sharp restriction of credit in the last quarter of 2008. The government cut sales taxes on vehicles, which allowed rapid recovery of sales and production.

Brazil’s domestic market, strengthened by real increases in wages and a fall in inflation, was a key factor in mitigating the effects of the crisis, as was the devaluation of the national currency, the real, against the dollar, another effect of the depression.

Brazil is reacting differently to the global recession because of its internal demand and its relatively low dependence on international trade. Increasing the minimum wage in real terms, a policy adopted by the government of President Luiz Inácio Lula da Silva since it took office in 2002, means that the food sector is relatively unaffected.

“The crisis has not affected, and will not affect, the base of the social pyramid,” partly because the low degree of inflation due to the crisis has made food cheaper, said Lupi.

On the other hand, the fall in international prices of agricultural commodities was compensated by the depreciation of the real, so that farmers maintained their incomes in national currency, the minister said. The same was true of the footwear industry, which dismissed a large number of workers in 2008, but recovered international competitiveness thanks to the devaluation.

At the present moment, the employment situation in Brazil is overcoming the brief interruption in the strong growth it has shown over recent years, but the minister acknowledged there is a serious structural problem in the national labour market: the enormous job instability.

The net gain of 1.45 million jobs generated last year is the result of nearly 15.5 million hirings and 14 million firings, the minister said. Over one-third of the total number of people in formal employment lose their jobs each year, indicating the large proportion of temporary jobs.

“This is an alarming characteristic of the Brazilian economy that has no foreseeable solution,” Lupi acknowleged. It is due to large numbers of jobs in agriculture, the retail sector, tourism and other services that are seasonal, depending on the harvests, holidays like Christmas or Mother’s Day, or the summer, he said.

In a country as large as Brazil, tens or hundreds of thousands of workers migrate looking for agricultural work cutting sugarcane, which is harvested at different times in the northeast, the southern state of Sao Paulo and the centre-west of the country, or harvesting maize or tobacco in different regions, he said.

Another negative factor is the lack of education and training. In 2008, close to one million jobs were not filled because there were no qualified applicants, the minister concluded.