This preview shows page 1. Sign up to view the full content.
Unformatted text preview: d debt. As mentioned before, job losses have so far not been massive. But, as global export demand continues to stagnate through 2010 and, perhaps, beyond, non‐extractive export industries will shed labor at accelerating speed. This will raise political pressure for government action, not least because the shedding will disproportionally affect the middle class. And few countries in the region have in place unemployment insurance systems with sufficient coverage. Some have worked on expanding that coverage (Brazil, Mexico). But, for the most part, efforts have focused on labor intermediation services, training, tax relief for small enterprises, subsidies to youth employment, state‐led temporary employment, and larger budgets for cash transfer programs. Whether these interventions work will depend on what form the recession takes. A short‐and‐sharp “V” shape downturn argues for transitory transfers to smooth the temporary fall in income, while a longer “U” or “L” shape contraction that causes changes in the productive structure calls for programs that facilitate inter‐sectoral adjustments—
like retraining. Independently of the shape of the recession (as of now, an unknown), the region’s governments have turned to public investment as an employment generation tool. They have pledged some US$ 25 billion in additional public works over 2009; data on actual execution is not available yet. The World Bank estimates that, on average, implementing US$ 1 billion of additional infrastructure outlays in Latin‐
America employs 40,000 people, depending on the mix of sectors, technology, wages and leakage to imports.6 And the number of permanent jobs created in the economy as a result of those outlays can reach several times that figure. For all the difficulties involved in employment generation, they may be dwarfed by, and will be framed in, the region’s financing needs. The World Bank estimates that, in 2010, Latin‐American governments will need to borrow between US$350 and 400 billion dollars. That assumes no major fiscal deterioration. It is mostly driven by amortizations coming due. For their part, private corporations will need an estimated US$200 billion next year. Little or no funding has so far been secured by either sovereign or private borrowers—unlike what happened during 2008 with 2009 obligations. At the same time, the international supply of finance will be constrained, even for investment‐grade borrowers, by the crowding‐out effect of the borrowing done by developed nations to pay for their own stimulus packages. And many of the traditional intermediaries of Latin‐American debt (notably investment banks) are currently out of commission or out of business. All this will shift some, perhaps as much as 5 Brasil, Chile, Colombia, Guatemala, México, Perú and Uruguay have set up formal inflation‐targeting arrangements. 6 Rural road maintenance appears to be the outlay with the largest employment impact: 200,000 to 500,000 jobs per billion dollars....
View Full Document