By Gustavo Capdevila
GENEVA, Jul 25 2002 (IPS)

Unemployment in Latin America this year will reach its highest level since the “lost decade” of the 1980s, driven by widespread and devastating economic crisis, says the International Labour Organisation (ILO) in a new report.

Unemployment rose from 8.1 percent of the region’s economically active population in the first quarter of 2001 to 9.4 percent in the same period this year, the highest in Latin America since 1980.

Calculations indicate that the annual rate for this year will be 9.8 percent, precipitated by acute economic situations, such as Argentina, where unemployment is 23 percent, and Venezuela.

The job deficit is on the rise in Latin America and the Caribbean due to the economic recession that has been in effect since last year’s third quarter, when the gross domestic product (GDP) began to decline, says the ILO.

In 2002’s first quarter, the regional GDP shrank 3.6 percent, representing an abrupt drop with respect to the 2.2 percent growth recorded in the same period of 2001.

The ILO is concerned that the recession deepened during the first three months of this year, becoming worse than in the fourth quarter of 2001, when growth was just 1.6 percent.

“The figures seem to indicate a deepening of the recessive dynamic affecting the region,” said Agustín Muñoz Vergara, director of the Americas division of the ILO.

They also show that even in conditions of global economic recovery, the region suffered negative growth in this year’s first quarter due to the effects of the recessive adjustment applied in many countries.

In addition to the impact of the economic contraction, the performance of the labour sector in Latin America and the Caribbean has been influenced by a change in expectations, according to Muñoz Vergara.

Projections made at the end of last year outlined GDP growth in Latin America of 1.5 percent for 2002. However, earlier this year the forecast was adjusted for growth of less than 1.2 percent.

The ILO report states that current financial uncertainty will mean a decline in investment in the region.

On another front, Argentina’s profound economic crisis and the increased “country risk”, a measure of the possibility of debt default, have taken their toll on its trade partners in Mercosur (Southern Common Market), Brazil, Paraguay and Uruguay.

Under current conditions, there is increased risk of devaluation and deeper recession throughout the bloc, and trade and financial flows in the rest of Latin America are in peril.

The ILO study mentions fears that the phenomenon would also spread to Mexico, which many economists say suffers its own structural weaknesses — excessive debt and high public spending — , similar to the Argentine case.

Other causes of concern come from Venezuela, where political instability is having a recessive effect that is cancelling out the benefits of a price rise on petroleum, its principal export, and from Colombia, where the decades-long civil war pushes down GDP growth.

In this context, average urban unemployment reported for the first quarter reached 9.4 percent, the highest in Latin America since 1980.

That figure even surpasses the worst jobless rates recorded in periods when recession affected the entire region, such as the crisis caused by the high foreign debt of the 1980s, which left unemployment at 8.7 percent in 1984.

There were even fewer unemployed during the crisis known as the “tequila effect”, triggered by the 1996 devaluation of the Mexican peso. The jobless rate then was 7.9 percent.

Not even the blows suffered as a result of the Asian crisis of 1997 led to unemployment of today’s level. When Latin America began to feel the impact, in 1999, the job deficit grew to affect 8.9 percent of the economically active population.

According to the ILO, employment fell from 52.5 to 51.9 percent, and the portion of people seeking work remained stable, varying only slightly from 57.4 to 57.3 percent between the first quarters of 2001 and 2002.

But there are three countries — Ecuador Colombia and Uruguay — where unemployment rates declined in that period.

The ILO attributes the decreased unemployment in Ecuador, of 3.1 percent, to the economic growth predicted for 2002, and particularly to the strong rise in emigration, which reduced the number of people seeking work.

In Colombia, unemployment fell 1.1 percent, in keeping with an incipient economic recovery.

The jobless rate shrank 0.1 percent in Uruguay in spite of pronounced contraction of the GDP. The ILO interprets the dynamic as a case in which the number of jobs and the number of people seeking work fell because of the economic recession.

In regards to the gender factor of unemployment, disparate experiences were reported throughout the region. In Argentina, Mexico, Peru and Venezuela, unemployment increased among men and women alike, but in all four cases the number of jobless women was far greater than the number of jobless men.

The labour outlook for the region is even more complicated for young workers. In this year’s first quarter, youth unemployment was 46 percent in Argentina, 13.7 percent in Brazil, 20.2 percent in Chile, 5.4 percent in Mexico, 17.1 percent in Peru and 26.2 percent in Venezuela.

According to the panorama the ILO outlined for 2002, the region’s overall GDP will shrink 1.2 percent, constituting a 2.7- percent reduction with respect to economic growth in 2001.

Over the course of the year, regional unemployment will rise to 9.8 percent, or a 1.6 percent increase with respect to the average in 2001, predicts the Geneva-based organisation.

Muñoz Vergara interprets the regional picture as proof that it is impossible to aspire for prolonged economic growth if there are not adequate social policies in place to ensure democracy and a decent standard of living.

The ILO official pointed out that the report reveals the risks inherent in the liberalisation of economies and its effects on the labour situation.

In addition to enacting positive national socio-economic policies, similar actions must be taken at the international level, he said.

With respect to international influence, incorrect diagnoses or poor application of policies have repercussions for the entire region.

The ILO director for the Americas also linked the loss of jobs to the eroding of the small and medium-sized business sectors. He called for urgent policies aimed at their recovery.

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