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Preliminary Overview of the Economies of Latin America and the Caribbean 2015

image of Preliminary Overview of the Economies of Latin America and the Caribbean 2015
This publication highlights a regional slowdown in GDP growth. It argues that the currency depreciation seen in several countries in the region could, if sustained, increase incentives for investment in tradeable sectors other than the region’s traditional exports (commodities), while redirecting expenditure to ease pressure on the current account. Growth-supporting industrial, trade, environmental, social and labour policies that take into account the needs of small and medium-sized enterprises, could help lessen the region’s structural heterogeneity. Growth combined with greater equality would thus gain economic and social sustainability, with greater reliance from investment and exports than before. It is argued that this combination would be aided by social covenants for investment.

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Employment and wages

Whereas an unusually sharp fall in the labour participation rate mitigated the labour market impact of the economic slowdown in 2014, a year later the labour market’s adjustment to the cooling regional economy reverted to the more usual historical patterns in Latin America and the Caribbean. 19 In 2015, the decline in labour participation stopped, and the larger number of individuals seeking income in the job market amid slack labour demand pushed up both open unemployment and time-related underemployment. It also caused a deterioration in employment composition, with a larger proportion of employment appearing in low-productivity activities, particularly own-account work, and very sparse creation of wage employment. As a result, average labour productivity declined sharply. In some countries, rising inflation also eroded real wages, which, compounded by the weak growth of employment and its deteriorating composition, reduced household purchasing power.

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