How Did Latin America Respond to the Global...
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How Did Latin America Respond to the Global Crisis? Labor Markets Policy Core Course – Washington DC Helena Ribe – Sector Manager LCHSD
Transcript of How Did Latin America Respond to the Global...
How Did Latin America
Respond to the Global Crisis?
Labor Markets Policy Core Course – Washington DC
Helena Ribe – Sector Manager LCHSD
What were the impacts in
LAC?
The recent global crisis affected LAC through a reduction in:
1. External financing2. Exports demand3. Prices of commodities4. Remittances
LAC’s overall GDP fell by 2.6 percent in 2009, after experiencing a 3.9
percent expansion during 2008. Central America, the Caribbean and
Mexico suffered the largest impacts
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Japan Eastern Europe
Western Europe
United States
Latin America
East Asian Tigers
China
Recent Real GDP Growth and Forecasts for 2009-2010Annual GDP Real Growth Rate,
2009 2010
-12%
-10%
-8%
-6%
-4%
-2%
0%
Arg
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a
Mexic
o
Co
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Pan
am
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Para
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Ho
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Do
m. R
ep.
Peru
Co
lom
bia
Guate
mala
Uruguay
LA
C
Tri
. &
To
b.
Ch
ile
An
t. &
Barb
.
Nic
ara
gua
Bra
zil
Jam
aic
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Ecuad
or
Guyan
a
Bo
livia
Hait
i
Do
min
ica
Belize
Collapse in GrowthDifference in Real GDP Growth between 2007 and 2009
LAC fared better than other regions,
but impacts varied across countries
The Global Crisis impact was less pronounced in LAC than in other areas of the world
The growth collapse showed significant differences across the region
Source: Regional Strategy Update 2010 - LCR
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168
2006 2007 2008 2009
Nu
mb
er
of P
oor
Peop
le (
Mil
lion
s)
Actual and Projected Poverty NumbersBased on Oct. 09 Projections
14.29.6
Projected
Counterfactual
The crisis set back social indicators
17.7
16.0
15.0
17.6
17.8
14
15
16
17
18
19
2006 2007 2008 2009 2010M
illi
on
of P
eo
ple
Total Unemployed Labor ForceLAC -7 Countries
Poverty for LAC is measured at PPP-adjusted US$4 a day. Source: Based on Azevedo, Molina, Rubiano, and Saavedra (2009). Source: Economist Intelligence Unit (EIU)
Before the Crisis:
• Between 2002 and 2008, almost 60 million people in LAC moved out of poverty…
• LAC was on track to meet most MDGs
• A large and vibrant middle class began to emerge in most countries
• Inequality declined throughout the region
Source: Regional Strategy Update 2010 - LCR
Main impacts of the crisis
Close to 14 million people in the region
became poor, reversing the achievements of
pre-crisis years
2.5 million people lost their jobs
Exports fell by 24 percent in 2009
Source: World Bank and United Nations
What would help prepare
a response?
Impact diagnosticsWidespread or limited impact?
Poverty?
Unemployment?
Social Impact?
Instruments in place? CCT?
Income Protection?
ALMP?
Sectoral interventions?
What were the Countries’ Responses:
Argentina, Brazil, Chile,
Colombia and Mexico
Cash Transfers played a Role Protecting poor
Households’ Consumption during the Crisis
In Brazil, the Bolsa Familia
program quickly responded
expanding coverage to 12 million
families and increasing the amount of
transfers by 10% in 2009
In El Salvador, human
development outcomes for
beneficiaries of Red Solidaria
were protected
The increase in malnutrition
was 4 percentage points
lower among beneficiaries
and their school attendance
increased
In Mexico, the Oportunidades
program added a monthly US$ 9 benefit
per family to compensate for higher
food prices. The program is expanding
from 5.2 million families to 5.8 million
families, mostly in urban areas
Measures to cushion labor
market impacts, by country
Minimum Wage Training Unemployment Insurance Wage Subsidies Public Works
Argentina X X X
Bolivia X X X
Brazil X X
Chile X X X
Colombia X
Guatemala X
El Salvador X
Honduras X X
Jamaica X X X
Mexico X X X
Source: World Bank, Latin America Beyond the Crisis, July 2009
Country responses were varied –
they were constrained by existing SP
systems and capacityConsumption
smoothingPoverty
prevention
Human
capital
promotion
Labor
market
interventions
ArgentinaR
R R
Chile R
R RR
BrazilR R R
R
Mexico R
RR R
El Salvador RR R
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Countries that have invested in the past now have
more capacity to respond
Moving ahead…
1. What can be done depends on what exists— countries with CCTs in place were able to protect the poorest but this is not sufficient
2. Broader income protection and labor market interventions are lacking in most countries
3. Improve ―just-in time‖ information and diagnostics
It is crucial to have systems that respondswiftly in times of crises:
Using a real-time social monitoring capacity
Preparing countries to better respond to crises and toprotect human capital indicators
Building on top of past achievements, promoting reforms, and implementing programs to attain a more effective and equitable Social Protection
Crises jeopardize poverty reduction and
gains in human capital indicators achieved in
the last decade. Therefore…
