ILO director: No quick recovery for Caribbean economies

Though the current downswing in the economic fortunes of Latin American and Caribbean countries cannot rate in shock value against the global, economic “heart-attack” of 2007-2008, for some it can probably be likened to the onset of chronic, silent killers such as hypertension and diabetes.

International Labour Organization (ILO) regional director for Latin America and the Caribbean, Jose Manuel Salazar, would prefer a comparison to “a very strong cold or indigestion”, with the prognosis being for slow, sustained contraction during a period that will place greater stresses on labour markets.

The ILO’s 2015 Labour Overview speaks of an economic slowdown whose accumulated effects can be described as a “slow-motion” crisis. In an exclusive interview with T&T Guardian, Salazar warned that the impact of the current decline in the fortunes of the wider region is likely to be “bigger than the quick, sharp shock of 2009” with potentially long-lasting economic impacts.

“In Latin America,” he said, “the recovery was ‘V’ shaped. It was a very quick recovery. But that’s because the origin of the crisis was financial.

“This time it’s different.”

He said the main source of the crisis, for many countries of Latin America and the Caribbean “is the end of the commodity super-cycle” during which there had been between ten and 15 years of high commodity prices.”

The ensuing favourable conditions, Salazar added, helped support a number of new policies designed to cushion the impact of the fallout from the crash. “But, that’s finished now,” he said. In the wider region, the stark impact of a reversal of fortunes on labour markets was felt in 2015. According to the ILO overview document, the decline is expected to continue in 2016.

The overview says while there had been an average low of 6.2 per cent unemployment in Latin America and the Caribbean, it was estimated that the statistic would climb to 6.7 per cent in 2015 which meant that as many as 1.7 million people region-wide would have joined the ranks of the unemployed, taking the combined figure to 19 million unemployed.

Claudia Coenjaerts, director of the ILO Office for the Caribbean told T&T Guardian the current situation calls for a high level of “social dialogue” that is fair and transparent. 

“You cannot have much of the transitions taking place without really considering what you do with those who are going to lose their jobs…how you train them…how you bring them back.

“In days like where we find ourselves now, we need to bring the concept of decent work on board,” Coenjaerts added. 

“The concept of decent work is exactly what becomes relevant at this time.”

The ILO’s Decent Work Agenda, as it’s called, prescribes a multi-sectoral effort to promote jobs, guarantee rights at work, extend social protection and promote social dialogue.

Salazar suggested that the most feasible way forward was to refer to the Global Jobs Pact (GJP) formulated by 186 countries following extensive discussions at the onset of the financial crisis and mediated by the ILO. He said the exercise was a “huge knowledge-sharing” process that brought many possible solutions and coping mechanisms to the table.

The GJP was adopted at the International Labour Conference in 2009 and undertook to retain people in employment “as far as possible”, sustain small and medium size enterprises, support job creation and promote investments in employment-intensive sectors, including green jobs.

There was also an undertaking to protect “the most vulnerable” people and families affected by the crisis, to accelerate the recovery of employment and to “equip the workforce with the skills needed for today and tomorrow.”

Salazar said the GJP “checklist” was good as a guide to “the different policy response measures that governments can use.” This, he said “also addresses the politics of it.” He said that countries also need “a good diagnostic” supported by sound statistics, transparency and “intensive dialogue.” If this process is followed, the ILO regional boss said there will be “credibility for the package of measures.”

“This talk about making sacrifices is fine,” he said, “everybody is prepared to make sacrifices as long as there is a feeling that there is a fair distribution.” He however conceded that “this is easy to say but not easy to do.”

“You need a commitment and you need good implementation. Because the trust can be broken not just in the moment of the formulation of measures but also in the implementation as time goes by,” Salazar said.

Importantly, Salazar said the prescription for change is “not just a matter of mitigating” the impact of decline and that the concept of neutral labour market impact is not just about “the justice of distribution, but also a sense of what comes next beyond the crisis.”

“You need a long-term horizon,” he said.

He cited situations such as the decline in national income from oil and gas in T&T saying the situation calls for “confidence that there is a national vision about what needs to be done.”

“Mitigate as much as possible to the extent that you have fiscal space,” he suggested. 

“Try to maintain the social programmes. Try to get unemployment training and retraining for youth, women and vulnerable and the ones most strongly hit.”

“This time,” Salazar said, “it’s not just financial (but) seems to be a bit more permanent.” 

Economic diversification, he urged, would be an important part of the solution. Coenjaerts said the island states of the Caribbean however comprised very small economics, “so when we talk about diversification you really need to keep in mind some of the particular challenges that need to be overcome.

She mentioned diversification, infrastructure, transportation and “how you build scale.” 

This, she said was “somewhat different than what happens in a big nation.”

“I do also think there is scope for looking at what has been learned in certain countries and what kind of policy packages have been employed,” she said. 

“But it is no easy task.”