Latin American job crisis will take years to solve

. Nov 23, 2020
latin america recovery Investing in renewable energy could be one way out of the crisis. Photo: Jose Luis Stephens/Shutterstock

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Today, the scars of the crisis — and a path to recovery for Latin America. And violence leads Brazil to a racial reckoning.

The coronavirus will leave deep scars in Latin America’s labor market

It will take several years for Latin America’s job market to return to pre-pandemic levels.

A <a href="">report</a> by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labor Organization (ILO) suggests that, even if GDP growth in the region remains steady at 3 percent or more, it would only return to 2019 employment levels — which were already far from ideal — in 2023.</p> <p><strong>Why it matters. </strong>Should the average GDP growth rate be on par with the average of the last six years (0.4 percent), recovery could take over a decade.</p> <p><strong>Challenges.</strong> The growing possibility of a second wave of Covid-19 infections should strike fear into the hearts of Latin American governments. The bulk of those worst-affected by the pandemic simply cannot work from home due to the nature of their jobs. That includes women (who are the majority of workers in household-related tasks), informal workers (affected by lockdowns), and those in services companies, one of the main employers in the region.</p> <h3>How can the region bounce back?</h3> <p>ECLAC experts say that the crisis could be seen as an opportunity to trigger development policies which should have been on the forefront of government agendas — but seem to be unavoidable for countries pushing for a quicker recovery. These are predicated on &#8220;active fiscal policies that foster employment, with labor-intensive investment projects and with a focus on environmental sustainability.&#8221;</p> <ul><li><strong>Renewable energy.</strong> Latin America has increased the share of renewable sources in its energy mix from 4 to 12 percent between 2010 and 2018. If the trend is accelerated, the region could create roughly 7 million new jobs. Brazil, Chile, Uruguay, and Costa Rica are among the region&#8217;s leaders in clean energy.</li><li><strong>Transportation.</strong> <a href="">Electric buses</a> are still a novelty in Latin America — with just 1,300 units in ten countries. Replacing or converting fleets could generate up to 5.5 million jobs in the transportation industry. The challenge is easier than it seems, as batteries are becoming cheaper and the conversion of conventional vehicles is not that expensive.</li><li><strong>Digitalization.</strong> The pandemic forced many companies to go digital or go bust. But the challenges in access to technology remain. Only 37 percent of companies in Latin America use the internet on their supply chains (against 70 percent of firms in OECD countries), and only 21 percent of workers would be able to work from home (against 40 percent in Europe and the U.S.).</li><li><strong>Health industries.</strong> The pandemic has pushed big groups to try and develop strategies to reduce exposure to health risks — a potential boost for health companies, which usually offer better-paying jobs.</li></ul> <p><strong>But, but, but … </strong>These goals need political will for reform and massive investment, which are not necessarily a common currency in Latin America. With most states in Latin America unable to invest in the recovery using their own money, countries will need to present themselves as attractive markets for foreign investors.</p> <hr class="wp-block-separator"/> <h2>Brazil needs a racial reckoning</h2> <figure class="wp-block-image size-large"><img loading="lazy" width="1024" height="576" src="" alt="racism" class="wp-image-53089" srcset=" 1024w, 300w, 768w, 600w, 1280w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Protest in front of Carrefour store where black man was killed by security guards. Photo: Guilherme Gonçalves/FP</figcaption></figure> <p>Friday, November 20 was Black Consciousness Day in Brazil, a public holiday in a number of states, it is a day for celebrating the black struggle in the country while reflecting on the structural racism that still exists in Brazilian society. This year, however, Brazil woke up on November 20 to some particularly harrowing news: in front of several witnesses, 40-year-old black Brazilian João Alberto Freitas was beaten to death by white security guards inside a supermarket in the southern city of Porto Alegre.</p> <p><strong>Brazil&#8217;s George Floyd.</strong> Eyewitness reports say that Mr. Freitas appeared to have gotten into an argument with an employee of the Carrefour supermarket and was then escorted outside of the store by security guards Magno Braz Borges and Giovane Gaspar da Silva.&nbsp;</p> <ul><li>Footage filmed by onlookers shows Mr. Freitas being brutally beaten, with the two security guards holding him to the ground, making it difficult for him to breathe. Indeed, post-mortem reports indicated that Mr. Freitas died of suffocation.&nbsp;</li><li>The circumstances surrounding his death echo those of <a href="">George Floyd</a>, the 47-year-old black American killed at the hands of four Minneapolis police officers in May.</li></ul> <p><strong>Protests. </strong>While the international wave of Black Lives Matter demonstrations in the wake of George Floyd&#8217;s death <a href="">did not properly catch on in Brazil</a>, protests broke out in several parts of the country on Friday, after news of João Alberto Freitas&#8217; murder went viral on social media. In São Paulo, dozens broke into a Carrefour store in the upmarket neighborhood of Jardins, knocking over shelves and setting fires.&nbsp;</p> <p><strong>&#8216;Racial democracy&#8217; a myth. </strong>Since the 1930s, there has existed a false sense of racial democracy in Brazil, based upon theories that the widespread miscegenation of society had created a colorblind country or a &#8220;race beyond races,&#8221; in the words of sociologist Gilberto Freyre. Indeed, this myth is peddled until today, despite clear evidence to the contrary, including incidents such as João Alberto Freitas&#8217; brutal death.&nbsp;</p> <ul><li>Over 56 percent of Brazil identifies as black or multiracial, yet the percentage of white elected officials, CEOs, executives, and managers is overwhelming.&nbsp;</li></ul> <p><strong>Head in the sand. </strong>President Jair Bolsonaro has yet to make a statement on the death of João Alberto Freitas, but he <a href=",um-dia-apos-assassinato-de-joao-alberto-bolsonaro-enaltece-diversidade-do-brasil-no-g20,70003523099">indirectly discussed the case</a>, saying the Brazilian left is piggybacking on racial disputes that do not belong in Brazil.&nbsp;</p> <ul><li>Vice President Hamilton Mourão, meanwhile, lamented the occurrence and blamed the &#8220;completely unprepared&#8221; security personnel. However, he claimed that the attack was not racially motivated, claiming that &#8220;racism does not exist&#8221; in Brazil. &#8220;It&#8217;s something they tried to import here in Brazil, it doesn&#8217;t exist.&#8221;</li></ul> <p><strong>Equality can be good business. </strong>Indeed, there are several areas of Brazil&#8217;s economy which simply overlook the potential of making themselves more accessible to the black and multiracial population.&nbsp;</p> <ul><li>A recent Nielsen survey shows that only 5.9 percent of beauty product sales in Brazil consist of items geared toward and used frequently by the black and multiracial population. Options are seen as being scarce and — when they exist — overly expensive. As an example, sunscreen suited for darker skin tones is on average twice the price of the rest of the product range.</li></ul> <p><strong>ESG just marketing?</strong> The case shows how companies still struggle to make ESG principles (environment, social, governance) more than just a nice marketing opportunity. On Friday, Carrefour stocks in Brazil went <em>up</em>, showing investors unfazed by the killing.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Throughout the coronavirus crisis, foreign investors have abandoned Brazil&#8217;s stock market. But this trend has been reversed in November. As of Friday, the net inflow of foreign capital stood at USD 4.78 billion after 12 straight positive trading sessions. Encouraging news about a Covid-19 vaccine have enticed investors&#8217; appetite for riskier assets — but the recent rally has not offset the record-setting flight of foreign capital in 2020, already at USD 10.9 billion.</p> <hr class="wp-block-separator"/> <h2>Blame it on the people</h2> <p>Brazil has confirmed over 6 million coronavirus infections and almost 170,000 deaths. Despite these high numbers — and evidence of a <a href="">second wave</a> on its way — President Jair Bolsonaro is more popular now than he was at the beginning of Brazil&#8217;s Covid-19 epidemic in March. And that is because an increasing number of voters believe the Brazilian people are to blame for the Covid-19 deaths&nbsp;—&nbsp;not authorities.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4438509"><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4438452"><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Elections. </strong>This is the last week of campaigning before runoff mayoral elections in some of Brazil&#8217;s key constituencies. In São Paulo, incumbent Bruno Covas appears to be safe with a lead of over 25 points over <a href="">left-wing challenger</a> Guilherme Boulos. Mr. Covas has promised to serve his term until the end — something his fellow party members have failed to do, as São Paulo&#8217;s City Hall is seen merely as a stepping stone towards the state governor&#8217;s office … and later a presidential bid. In Rio de Janeiro, former Mayor Eduardo Paes is on course to beat incumbent <a href="">Marcelo Crivella</a> by a landslide.</li><li><strong>Economy. </strong>Despite recognizing that the coronavirus emergency aid has been pivotal to avoiding a massive poverty crisis amid the pandemic, the government is no longer considering extending the benefit beyond December. &#8220;It costs too much,&#8221; said Waldery Rodrigues, a special secretary at the Economy Minister. The aid program helped to reduce inequality by 10 percent according to the Gini index and experts believe ending these benefits could see inequality shoot <a href="">back to 1970s levels</a>. The International Monetary Fund singled out Brazil as one of the countries which should increase fiscal support next year beyond projected levels, saying that pulling back could jeopardize its recovery.</li><li><strong>Vaccine.</strong> On Sunday, Brazil&#8217;s Health Ministry said it will sign non-binding letters of intent to purchase coronavirus vaccines from five manufacturers (four companies and Russia&#8217;s sovereign wealth fund). One <a href="">lab missing on the list</a>, however, is China&#8217;s Sinovac Biotech — whose vaccine has achieved 97 percent efficacy in preliminary studies. The vaccine being developed by University of Oxford — the government&#8217;s biggest hope — showed an average<a href=""> efficacy</a> of 70 percent.</li><li><strong>Chile.</strong> The Chilean government has asked the country&#8217;s highest court to strike down a bill presented by the opposition to allow for a second 10-percent withdrawal from Chileans&#8217; pension accounts, limited to USD 5,277. The first round of withdrawals saw 2 million people empty their pension accounts. A similar result this time around would mean that nearly half of Chileans would be left with <a href="">no retirement savings</a>.</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>GDP.</strong> According to forecasts made by think tank Fundação Getulio Vargas, economic activity in Brazil grew 7.5 percent in Q3 2020 when compared to the previous quarter. The rally, however, was not enough to recover the 9.7-percent drop registered in Q2, and Brazil’s economic activity levels remain 5 percent below where they were at the beginning of the year.</li><li><strong>Congress.</strong> With the year winding down and 2021’s budget still to be voted on, members of the Bolsonaro administration have already admitted that no other relevant legislation will be approved in Congress until February 2021 — when both congressional houses will elect new speakers and presidents. Bills that would make the federal budget more flexible and the creation of a new cash-transfer program sit atop the government’s agenda. </li><li><strong>Military. </strong>Brazilian planemaker Embraer has finalized the sale of two KC-390 military planes to the Hungarian government. The deal was estimated at USD 300 million and deliveries will be made in 2023 and 2024. The KC-390 being sold to Hungary will be the first in the world with an option for installing an intensive care unit onboard — which is essential for humanitarian missions.</li><li><strong>Diplomacy. </strong>The final declaration of the latest BRICS Summit showed that Brazil, India, and South Africa have lost support from Russia and China — the group’s two diplomatic top dogs — in their struggle for more global prominence. Over the past decade, the group had consistently shown support for expanding the United Nations Security Council, with the inclusion of the three emerging countries as permanent members. This time around, this matter was not even mentioned in the summit declaration. This omission comes as the Brazilian government is becoming increasingly aggressive towards <a href="">China, the bloc&#8217;s undisputed leader</a>.

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