Latin America and the Caribbean: Time for Reforms to Address Long-Standing Challenges, Says New Report

Reforms

The Development Centre of the OECD, ECLAC, CAF and the European Commission launch today their joint report Latin American Economic Outlook (LEO) 2021.

Latin American and the Caribbean (LAC) is the region most affected by the COVID-19 pandemic, and at risk of seeing the socio-economic gains of recent decades being reversed. Recovery strategies must comprise well-sequenced reforms that promote universal social protection systems, accelerate the formalisation of economies, improve fiscal progressivity, and deepen regional integration, says the Latin American Economic Outlook (LEO) 2021: Working Together for a Better Recovery.

According to this 14th edition of the report, LAC experienced a historical economic downturn in 2020. The region’s gross domestic product (GDP) contracted by around 7.0%. Despite a rebound of around 6.0% in 2021, its GDP per capita is not expected to return to pre‑crisis levels before 2023‑24. The impact of the crisis has been asymmetric, particularly affecting the most vulnerable groups. As a result, poverty and extreme poverty levels are at their highest in 20 and 12 years, respectively.

While the report recognises the considerable efforts made to protect most vulnerable, including women, the youth and elderly during the pandemic, it also stresses that close to 40% of workers had no social protection when LAC countries entered the crisis. This is largely because, on average, more than 50% of workers in the region work informally. Advancing towards universal social protection systems is fundamental to protect those most in need in the post-pandemic context.

According to LEO, a robust and inclusive recovery requires more productive integration in strategic sectors including the automotive, pharmaceutical and renewable energy sectors, the circular economy and sustainable agriculture. It also demands an urgent holistic fiscal response: greater progressivity of the taxation system, higher tax compliance, stronger tax administration, and eliminating inefficient tax expenditures. Reducing tax evasion and avoidance or eliminating some tax expenditures that represent close to 4% of GDP could increase revenues and equity without compromising the economic recovery.

LEO 2021 highlights that only 38% of citizens trusted their governments in 2020, down from 45% in 2010. Social discontent remains a key concern, as seen in the protests in some countries of the region. Moreover, satisfaction with public services, including education and health, markedly decreased during the pandemic. For education, it decreased from 66% in 2019 to 53% in 2020. As a response, the report explores policy actions to rethink the social contract in the region, suggesting four principles to guide a process of consensus building: conciliate, contextualise, compensate, and communicate.

The publication also stresses the role of international cooperation in facilitating the emergence of such new development models and a new social contract in the region. National responses to both the sanitary and socio economic consequences of the crisis need to be accompanied by renewed partnerships for the recovery that place sustainability, resilience and well-being at their core. The design of debt treatment paying attention to each country’s characteristics, in particular the challenges faced by Small Island Developing States of the Caribbean countries, is essential for a successful recovery.

The LEO is jointly produced by the Development Centre of the Organisation for Economic Co-operation and Development (OECD), the United Nations Economic Commission for Latin America and the Caribbean (UN-ECLAC), CAF’s Development Bank of Latin America and the European Commission.

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The High Prevalence of Non-Communicable Diseases in the Caribbean is Exacerbating the Pandemic’s Impact and Hindering the Subregion’s Progress Towards Sustainable Development

Disease

Alicia Bárcena, Executive Secretary of ECLAC, and Camillo Gonsalves, Minister of Finance, Economic Planning and Information Technology of Saint Vincent and the Grenadines, led a seminar on this issue prior to the 20th meeting of the Monitoring Committee of the Caribbean Development and Cooperation Committee.

The high prevalence of non-communicable diseases in the Caribbean – such as high blood pressure, diabetes and cancer – is exacerbating the impact of the COVID-19 pandemic and hindering the subregion’s progress towards achieving sustainable development due to their multiple health, economic and social consequences, according to the authorities, representatives of international organizations and specialists participating in a virtual event organized by the Economic Commission for Latin America and the Caribbean (ECLAC) prior to the Twentieth meeting of the Monitoring Committee of the Caribbean Development and Cooperation Committee (CDCC), to be held today.

The Seminar on non-communicable diseases and their impact on sustainable development in the Caribbean was inaugurated by Alicia Bárcena, Executive Secretary of ECLAC, and Camillo Gonsalves, Minister of Finance, Economic Planning and Information Technology of Saint Vincent and the Grenadines. The moderator was Diane Quarless, Director of ECLAC’s Subregional Headquarters for the Caribbean, located in Port-of-Spain.

“Not only does the COVID-19 pandemic continue to rage in the Caribbean,” Alicia Bárcena affirmed upon emphasizing that it is “one of the subregions of the world with the highest prevalence of non-communicable diseases (NCDs).”

Data from the World Health Organization (WHO) shows that NCDs are the main cause of death in the subregion’s countries, ranging from 57% in Haiti to 83% in Barbados, she stated. In each Caribbean country, more than half of all deaths annually can be attributed to non-communicable diseases, which also contribute significantly to disability, ECLAC’s Executive Secretary warned.

The pandemic has aggravated the risks that people with non-communicable diseases face: not only do they continue to be at greater risk of dying or suffering severe illness from COVID-19 infection, they also have been affected by interruptions in health care due to services being overburdened, Bárcena explained.

In this context, the high-level United Nations representative called for accelerating vaccination efforts. The rate of full vaccination in the Caribbean amounts to 35.2%, with great heterogeneity between countries. This percentage, she indicated, is below the global rate (39.0%) and that of Latin America (47.5%).

“The entire region of Latin America and the Caribbean should strengthen production, distribution and access to medicines and vaccines. To achieve this, on September 18, ECLAC presented the Plan for self-sufficiency in health matters requested by the Community of Latin American and Caribbean States (CELAC). We are moving from design to implementation of the plan, with focal points in all the countries and various meetings planned for the coming months. We hope the Caribbean will join us,” Bárcena stated.

In his remarks, Minister Camillo Gonsalves of Saint Vincent and the Grenadines expressed appreciation for the opportunity to address the problem of non-communicable diseases at a time when all Caribbean countries are fighting the pandemic and many of their ministers and leaders are talking about climate change and the subregion’s future in the framework of the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 26).

“Non-communicable diseases are responsible for 6 of the 10 main causes of death in the subregion” and they entail a heavy economic cost for governments, due to high health expenditures, as well as for people, Minister Gonsalves said. NCDs have a disproportionate impact on people living in poverty, which means that addressing them constitutes a development challenge for the Caribbean, which is also true for other phenomena such as climate change, he noted.

“Non-communicable diseases are within our control, they are preventable,” the Minister acknowledged, affirming that current policies are not effective because they are not sufficiently focused on prevention, nor do they include cross-sector and coordinated approaches.

The seminar’s first panel featured remarks by Kenneth George, Chief Medical Officer of Barbados; Fitzroy Henry, Professor at the College of Health Sciences of the University of Technology of Jamaica; Kavita Singh, Senior Research Scientist at the Public Health Foundation of India; and Francis Morey, Deputy Director of Health Services of Belize; while Simon Anderson, Professor and Director of the George Alleyne Chronic Disease Research Center at The University of the West Indies, Cave Hill Campus Barbados, acted as moderator. Subsequently, Joy St. John, Executive Director of the Caribbean Public Health Agency, led a discussion.

Participating in the second and final panel were Anselm Hennis, Director of the Department of Noncommunicable Diseases and Mental Health at the Pan American Health Organization (PAHO/WHO); Rachel Nugent, Vice President of Global Noncommunicable Diseases at RTI International; Stanley Lalta, from the Centre for Health Economics of The University of the West Indies, St. Augustine Campus, Trinidad and Tobago; and Rosa Sandoval, Coordinator of the Economics of NCDs Team at PAHO. Acting as moderator was Abdullahi Abdulkadri, an official at ECLAC’s Subregional Headquarters for the Caribbean.

The specialists called on governments to invest in a comprehensive approach to NCDs, with a focus on strengthening primary care and preventing risk factors such as an unsuitable diet, physical inactivity and tobacco and alcohol abuse. They also urged for taking growing mental health problems into consideration.

At the close of the event, Alicia Bárcena summed up what had been discussed, delivering 10 messages. First, she said, COVID-19 was a wake-up call about the importance of addressing non-communicable diseases. Because care and treatment for NCDs were reduced during the pandemic, it is urgently necessary to support the efforts of health services with innovations in telemedicine and other solutions, she sustained. She also posed the need to utilize all available tools to foster healthy lifestyles, strengthen primary health care and community-based programs, and promote food security, nutrition-sensitive social protection and support for farmers.

Bárcena further contended that it is critical to achieve greater equity in access to essential medicines, reduced waiting times and reduced out-of-pocket payment burdens for people, while also expanding partnerships with academic institutions in the Caribbean and reinforcing inter-agency collaboration. The idea of using taxes on unhealthy products is also generating interest and should be carefully weighed using a sound socioeconomic analysis, she added.

To procure a resilient post-pandemic recovery, Caribbean countries need a healthy and productive workforce, the Commission’s Executive Secretary stressed. The GDP of the Caribbean dropped by 7.7% in 2020 as a result of the pandemic, compounding the high rates of indebtedness faced by the subregion’s countries. ECLAC estimates that in 2021, the Caribbean’s GDP will only grow by 4.1%.

“By taking an economic approach to the analysis of the NCD problem, we hope that policies aimed at promoting health and preventing disease will not only be cost-effective but that they may also be cost-saving, thereby making government health expenditures more effective,” Bárcena emphasized. This is a problem for society as a whole, which must be addressed beyond the health field. “Interventions on non-communicable diseases are within our reach. You can count on ECLAC.”

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Africa, Latin America and the Caribbean Join Forces to Drive Circularity

Zero waste concept art

Taking the first steps of collaboration among the regions, the respective countries are pursuing efforts to scale circularity through the promotion of conducive public policies and the creation of investment opportunities.

 

The practice of using discarded products are raw materials to be used as a new product or material, is in some respects more efficient than simply recycling. With this in mind, the African Circular Economy Alliance (ACEA), and the Circular Economy Coalition of Latin America and the Caribbean (CECLAC) have organized the first regional dialogue to strengthen cooperation around their common objectives.

 

The event titled “Regional deep-dive: Africa, Latin America & the Caribbean joining forces for circularity”, took place as part of the World Circular Economy Forum 2021, organized by Sitra and Environment & Climate Change Canada. The event, held on 15 September, was launched by the Ministers of Environment of Colombia and Rwanda, who underlined the role that the circular economy can play in driving a green recovery from the Covid-19 pandemic. Being key advocates in their respective regions, both countries are also part of the Global Alliance on Circular Economy and Resource Efficiency.

 

The high-level keynote speeches were followed by a panel discussion moderated by James Mwangi, Executive Director of Dalberg, which brought together key circular economy practitioners from Africa and Latin America.

 

Discussions were held among entrepreneurs, academics, and champions on the need to scale up the transition towards circular economies. “Circular economy is a key puzzle piece to reach the climate targets. It will be instrumental in driving the change in key sectors … Latin America and Africa can be frontrunners in this journey, where governments and industry work together,” said Gonzalo Muñoz, High-Level Climate Action Champion  COP25.

 

Wanjiru Waweru Waithaka, founder and CEO of FunKidz, added: “Circular economy is not a new concept to Africa. From our traditional building techniques to the way we stored water and food. We did not waste, nor depend on factory-produced items. We need to go back into our cultures and relearn how to live in and with nature.”

 

Panelist Kenneth Amaeshi, Chair of Business and Sustainable Development at the University of Edinburgh, and entrepreneurs from both regions, showcased concrete business models that SMEs are undertaking and implementation solutions to achieve a circular economy.

 

“I have no doubt that Africa’s youth will be a game changer for the circular economy,” said Anthony Nyong, Regional Director of the Global Center on Adaptation (GCA) Africa, closing the meeting. “Africa is the continent where most of its infrastructure needed is yet to be built. There is an opportunity to build climate-resilient systems that provide jobs for the youth.” He concluded by announcing the first edition of the African Youth Adaptation Solutions (YouthAdapt) Challenge call for applications launched by GCA and the African Development Bank.

 

The key takeaways of the event echoed the outcomes of the first High-level Meeting of the Global Alliance on Circular Economy & Resource Efficiency (GACERE) held the day before, during which Ministers of Environment of several countries and representatives from multilateral organizations emphasized the need for stronger regional cooperation to accelerate the adoption of the circular economy model worldwide. Representing the African Development Bank, the Acting Director for Climate Change and Green Growth, Al-Hamdou Dorsouma, stated that policies, financing and the upskilling of African youth and workers will be key enablers for the circular economy transition.

 

With its strong climate benefits, most notably the reduction of greenhouse gas emissions, the circular economy is likely to be on the agenda at COP26, which will be held in November in Glasgow.

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Amid the COVID-19 Crisis, Latin America and the Caribbean Received in 2020 the Lowest Amount of Foreign Direct Investment in a Decade

Covid crisis

In a new report, ECLAC calls on the region’s countries to channel FDI flows – which are expected to hold steady in 2021 – towards activities that generate greater productivity, innovation and technology.

In the context of the severe health, economic and social crisis prompted by the COVID-19 pandemic, Latin America and the Caribbean received $105.48 billion dollars in Foreign Direct Investment in 2020 – 34.7% less than in 2019, 51% less than the record high achieved in 2012, and the lowest amount since 2010, the Economic Commission for Latin America and the Caribbean (ECLAC) indicated today upon presenting its annual study Foreign Direct Investment in Latin America and the Caribbean 2021.

Globally, the amount of Foreign Direct Investment (FDI) dropped by 35% in 2020 to approximately $1 trillion dollars, which represents the lowest value since 2005. Latin America and the Caribbean has experienced a downward trend since 2013, which has spotlighted the relationship between FDI flows and commodity price cycles, mainly in South America, according to the report launched at a virtual press conference held by Alicia Bárcena, the United Nations regional organization’s Executive Secretary.

The international context suggests that global FDI flows will recover slowly. Furthermore, the pursuit of assets in sectors that are strategic for the international reactivation and for public plans to transform the productive structure (infrastructure, the health industry, the digital economy) indicates that most of these operations will be centered on Europe, North America and some countries in Asia, increasing global asymmetries, the study warns.

In Latin America and the Caribbean, FDI projects experienced a rebound between September 2020 and February 2021; however, from that month to May 2021, it appears that a new drop occurred in the value of the announcements made. “In this scenario, it is difficult to imagine that FDI inflows into the region could increase by more than 5% in 2021,” ECLAC’s report states.

“FDI has made relevant contributions in Latin America and the Caribbean, but there are no elements indicating that in the last decade it has contributed to significant changes in the region’s productive structure or that it has served as a catalyst for transforming the productive development model. Today, the challenge is greater due to the characteristics and magnitude of the crisis. We need to channel FDI towards activities that generate greater productivity, innovation and technology,” Alicia Bárcena sustained.

ECLAC, she said, has identified eight strategic sectors to drive a big push for sustainability in the region. These sectors – which could be bolstered by FDI – are the transition to renewable energy; sustainable electromobility in cities; an inclusive digital revolution; the health-care manufacturing industry; the bioeconomy; the care economy; the circular economy; and sustainable tourism.

The report indicates that FDI increased in just five of the region’s countries in 2020: the Bahamas and Barbados in the Caribbean; Ecuador and Paraguay in South America; and Mexico, which is the second-biggest recipient in the region after Brazil. The natural resources and manufacturing sectors, with declines of -47% and -38%, respectively, were the hardest hit in 2020. Renewable energy held steady as the sector in the region that sparks the most interest among foreign investors.

In 2020, the United States increased its participation in the region’s FDI from 27% to 37%, amid a sharp decline for Europe (which fell from 51% to 38%) and Latin America (which went from 10% to 6%). “The smaller decline of the United States as a source of FDI is due mainly to the increase in that country’s investments in Brazil in 2020. In contrast, the inflows from the two European countries that had the most investments in Brazil – the Netherlands and Luxembourg – fell between 2020 and 2019, which led to Europe having less weight as an investor,” the document states.

In 2020, the flows of Latin American transnational enterprises (known as translatinas) also plunged (-73%), although with sharp heterogeneity: while Chile and Mexico showed an increase in direct investment flows abroad, Argentina, Brazil, Colombia and Panama recorded setbacks.

“In addition to maintaining emergency aid for the most vulnerable sectors of the population and smaller companies, the region’s countries should set in motion strategic plans both for reactivation and the transformation of production. Governments and the private sector should use their capacities so that the policy for attracting foreign capital becomes part of industrial policy as an instrument for transforming the productive structure,” Bárcena emphasized.

The second chapter of the report, entitled “Chinese investment in a changing world: repercussions for the region,” poses that “Latin America and the Caribbean’s process for recovering from the COVID-19 pandemic is an opportunity to start a new phase in its economic relations with China and to develop policies to ensure that investments by that country contribute to building productive capacities in receiving countries, to establishing ties with local suppliers, to creating employment, and to promoting sustainable development. Multilateralism must be part of this strategic approach.”

Finally, the third chapter, entitled “Investment strategies in the digital age,” analyzes digital development in the world and the region through a conceptual model that includes three dimensions (connected economy, digital economy and digitized economy) and addresses numerous challenges related to inclusion, innovation, regulation and taxation, among others. FDI can contribute to the digital transformation in Latin America and the Caribbean, ECLAC affirms, but if the structural characteristics of the region’s economies are not taken into account, digitalization could widen existing gaps and produce greater exclusion and distributive inequality, it concludes.

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Brazil Leapfrogs Indonesia As Most Complex Place To Do Business in 2021

Global business

Eighth annual Global Business Complexity Index (GBCI) reveals focus on good governance and responsible business; tougher penalties for breaching regulations; long-term impact of Covid-19 on global business landscape.

The comprehensive report by TMF Group, a leading professional services firm, analyses rules, regulations, tax rates, penalties and compliance issues across 77 jurisdictions, accounting for 92% of the world’s total GDP and 95% of net global FDI flows.

292 indicators are tracked annually, offering data on key aspects of doing business, including incorporation timelines, payroll and benefits, and staying compliant.

Brazil ranks as the most complex jurisdiction this year, leading a list of six Latin America countries in the top ten, with Mexico, Colombia, Argentina, Bolivia and Costa Rica close behind. Brazil’s ranking owes a lot to bureaucracy: businesses register with three different levels of authorities (federal, state and city) when incorporating. Furthermore, tax rates differ from city to city and state to state.  

France and Poland top the European rankings as the 2nd and 10th most complex. Indonesia, at number six, is the only jurisdiction in APAC in the top ten.

Denmark and Hong Kong are the simplest jurisdictions, followed by the Cayman Islands, Ireland and Curaçao. Denmark’s success is driven by a straightforward incorporation process, acceptance of English documentation, and digitalisation.

The UK has moved down to 58th, meaning it is simpler to do business. The conclusion of Brexit, along with new international trade agreements, brings increased clarity and stability. Familiarity with digital tax processes has increased and the legislative environment stabilised – law changes resulting in greater economic substance requirements are unlikely to be approved within the next five years.

The United States continues to be an attractive destination, ranking 7th least complex. Factors driving ease of doing business include the three-week turnaround to incorporate via a single body, the ability to pay taxes from a foreign bank account, and that company directors need not be US residents. 

TMF Group CEO Mark Weil said: “Our 2021 report is written in the shadow of Covid-19 and the disruptions to travel, trade and health that it has brought. Within that difficult backdrop, attracting and encouraging business investment remains a critical driver of the world economy and local prosperity, and we at TMF Group are pleased to play our part in encouraging simplification by regulators and governments.

“A continuing observation, from our eight years of reporting on complexity, is that some of the most attractive markets to operate in are both the most complex and the most punitive for getting things wrong. Firms typically have a small number of large bases, often in relatively simple locations to operate in. They then have a long tail of offices at lower scale in more complex locations. That exposure caused by their ‘complex tail’ is where risk concentrates.”

In addition to analysing 77 locations, the report identifies key themes shaping the global business landscape and regulatory environment.


Stricter penalties

There has been a global increase in penalties for non-compliance. Fines are the most common penalty for accounting and tax misdemeanours, imposed for doing business without being tax registered in 93% of jurisdictions in 2021 compared to 84% last year.

Penalties are more stringent in complex jurisdictions. While 45% of jurisdictions globally can suspend an operating licence for doing business without being tax registered, this jumps to 70% in more complex jurisdictions. Since 2020, there has also been an increase in fines for errors in tax reporting and payment.

 

Rise of responsible governance

There is renewed focus on ensuring companies behave responsibly across all business activities, from employing workers to paying taxes and ensuring transparent structures.

Requirements such as UBO and PSC have remained steady since 2020, as has the percentage of jurisdictions adopting ownership records, demonstrating that transparency processes are consistent year-on-year. The report shows the requirement to provide UBO and/or PSC information to a central register is highest in EMEA at 82% of jurisdictions compared to 43% in APAC.

The mandated involvement of a third party in business operations has increased. In 2020, 17% of jurisdictions required that an entity appoint and register a certified accountant, compared to 27% in 2021.


Impact of Covid-19 on digitalisation, HR and payroll

Covid-19 has accelerated the trends toward process digitalisation and simplification of interactions between businesses and government authorities. In 2021 the automatic notification of all relevant state authorities when a company incorporates rose to 14% of jurisdictions globally, up from 6% in 2020.

Some jurisdictions are temporarily permitting digital signatures, a step which is predicted by our experts to become a long-term change. Conversely, there have been significant delays in jurisdictions such as Colombia and Argentina where in-person appointments are required to process incorporation documentation.

The report highlights how the pandemic has changed how companies manage employees. In 2021, 20% of jurisdictions allowed businesses to dismiss an employee without reason, falling from 29% in 2020. North America’s 14 jurisdictions contributed most to this fall, with 64% permitting such dismissals in 2020 versus 23% in 2021.

Remote working and a globalised workforce bring challenges in hiring and payroll, across and within jurisdictions. In the US, Covid-19 has led to companies hiring remote workers in different states, bringing payroll challenges because income taxes are set and reported at state level.

 

Top ten:

 

  1. Brazil
  2. France           
  3. Mexico           
  4. Colombia
  5. Turkey
  6. Indonesia
  7. Argentina
  8. Bolivia
  9. Costa Rica
  10. Poland


Bottom ten:

  1. Mauritius
  2. El Salvador
  3. The Netherlands
  4. United States
  5. British Virgin Islands
  6. Curaçao
  7. Ireland
  8. Cayman Islands
  9. Hong Kong
  10. Denmark

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Labor Markets in the Region Will Be Slow to Recover from the Severe Impact of the COVID-19 Pandemic in 2020

Covid recovery

A new ECLAC-ILO joint publication warns that in order to reduce the high unemployment rates seen during the pandemic, significant efforts will be needed on employment policies aimed at the most vulnerable groups.

Regional GDP in 2020 experienced a -7.1% contraction, the biggest in a century, producing in turn a drop in employment and an increase in the unemployment rate, which reached 10.5% on average that same year, ECLAC and the ILO indicate in a new study released earlier in June.

The Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO) launched this Monday, June 14, edition No. 24 of their joint publication, Employment Situation in Latin America and the Caribbean (June 2021) – now available online – in which they analyze the impact of the crisis prompted by COVID-19 on the main labor market indicators in 2020.

According to the document, the biggest effects were seen in the second quarter of last year, when governments implemented confinement measures and others aimed at containing the pandemic. These measures produced a sharp drop in economic activity, employment, and in the number of hours worked. Many workers, mainly informal ones, were unable to continue their productive tasks and had to withdraw from the market, which prevented them from earning income for their households and acting in a countercyclical way, as in previous crises. Furthermore, the suspension of care services and schools gave rise to a heavy workload inside homes, which is unequally distributed in general, overburdening women in particular.

Starting in the third quarter of the year, workers began returning to the labor market and a gradual increase in employment was observed. However, 2020 ended with lower levels of labor participation and employment and higher levels of unemployment than what existed before the pandemic.

“Given the depth of the impact of the crisis in the region’s labor markets in 2020, countries must implement policies that stimulate job creation, particularly among the most vulnerable groups such as young people and women,” Alicia Bárcena, ECLAC’s Executive Secretary, and Vinícius Pinheiro, the ILO’s Regional Director for Latin America and the Caribbean, stated in the publication’s foreword. The two officials also stressed the importance of regulating new forms of hiring through digital platforms.

According to the report, the contraction in employment in 2020 was much more pronounced in sectors such as the hotel business (19.2%), construction (11.7%), trade (10.8%) and transportation (9.2%), which together account for around 40% of regional employment. At the same time, industry (8.6%) and other services (7.5%) also experienced contractions, while in the agricultural sector there were comparatively fewer job losses (2.4%).

Both United Nations organizations emphasize that it is essential to think about strategies that would enable laying the foundations for a return to the job market with better labor conditions for all workers. This entails shoring up the employment recovery in the most highly affected categories and sectors, improving institutional aspects regarding health and job safety, formalizing workers, promoting women’s labor inclusion, and adequately regulating new work modalities.

In the current edition of the Employment Situation in Latin America and the Caribbean, ECLAC and the ILO also examine key aspects of decent work for workers mediated by digital platforms. During the pandemic, these workers constituted a very important source of employment due to the need to reduce personal contact and maintain the dispatch of essential goods. However, evidence suggests that there is a high degree of precariousness in this work modality characterized by instability, long workdays, the absence of socio-labor protection, and the lack of options for dialogue and representation.

The report emphasizes the need to design adequate regulatory frameworks to achieve the goal of establishing and protecting social and labor rights for these new and expanding work modalities.

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Alicia Bárcena Calls for Prioritizing Nature-based Solutions to Protect Ecosystem Integrity and Biodiversity, and Place Value on their Contribution to the Economy and Society

Biodiversity

The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, called today for taking decisive climate action including to decarbonize economies, restore ecosystems and place value on their contribution to the economy and society, during a seminar organized by the Regional Office of the United Nations Environment Programme (UNEP) and the National College of Mexico.

During her presentation on the economic perspective regarding sustainability, the senior United Nations official stressed the urgency of changing the development paradigm and model that have led us to overshoot the planet’s limits, with high economic and social costs.

“A window of opportunity opens today to rethink the development of the infrastructure of life: environment and nature, health, pensions, housing, employment, social protection, and moving towards a care society,” Alicia Bárcena affirmed.

ECLAC’s highest authority was one of the main speakers on the second day of the event held to present the report Making Peace with Nature: A scientific blueprint to tackle the climate, biodiversity and pollution emergencies, produced by UNEP, which was moderated by Julia Carabias, an academic from the Faculty of Sciences of the National Autonomous University of Mexico (UNAM).

Participating in the event with Alicia Bárcena were José Sarukhán, National Coordinator of the National Commission for the Knowledge and Use of Biodiversity (CONABIO); Cristián Samper, President and Chief Executive of the Wildlife Conservation Society; Hesiquio Benítez, Director of International Cooperation and Implementation of CONABIO; María Jesús Iraola, Lead Author and Coordinator of the sixth Global Environment Outlook (GEO-6) for Youth report; and Piedad Martin, UNEP’s Deputy Regional Director in Latin America and the Caribbean.

In her presentation, ECLAC’s Executive Secretary stressed that the region has extraordinary, but highly threatened, biodiversity, with the greatest loss of primary forest, 31 areas with eutrophication of the seas and 19 dead zones, 25% of socio-environmental conflicts globally, and incomplete and fragmented environmental institutions with small budgets and weak regulations.

She added that during the pandemic, the region has experienced greater use of natural resources for subsistence, self-employment, energy and food, among other purposes. It has also recorded an increase in illegality, above all in mining; a weakening of environmental rules and of environmental impact assessments on major development projects; reprimarization; and a reduction in environmental budgets.

Alicia Bárcena specified that COVID-19 broke out in the region in the context of three structural crises: a social crisis that is reflected in the high levels of inequality, with severe social, political and economic consequences; an economic crisis that translates into low growth in production and trade, and the decoupling of the financial system; and an environmental crisis that is manifested in environmental degradation that is irreversible in many cases, with potentially disastrous consequences for the planet.

“These three crises and the policies needed to overcome them mutually interact. Changing the region’s development pattern requires acting on all three in a coordinated way. To achieve this, a minimum growth rate of 4% is needed. This must be accompanied by a very sharp redistribution – that the wealthiest 1% give to the poorest 1% – and that is only attainable through fiscal policies,” Alicia Bárcena explained.

She emphasized that ECLAC proposes a transformative recovery with equality and sustainability. To that end, the Commission has identified eight sectors that promote technical change, generate employment and reduce external constraints and the environmental footprint. These are the transition towards renewable energy, sustainable electromobility in cities, an inclusive digital revolution, the health-care manufacturing industry, the bioeconomy, the care economy, the circular economy, and sustainable tourism.

ECLAC’s Executive Secretary called for bridging the short and long term through expansionary fiscal policy and low interest rates, an increase in tax collection using the criteria of progressivity, the expansion of sources of taxation, and the harnessing of sources of public finance to mobilize private financing, such as bonds and green finance.

On environmental matters, she called for internalizing the information available in countries’ national accounts, introducing environmental taxes or adjusting those already in existence, incorporating sustainability into the evaluation of investment, and measuring development, natural heritage and well-being and not just market transactions, among other measures.

Finally, Alicia Bárcena urged for strengthening regional integration.

“We are a megadiverse region and we have to talk about biodiversity with a single voice, and with a renewed multilateralism,” she concluded.

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COVID-19 is Showing Small Businesses the Benefits of Digital Financial Services

Digital finance

Written in collaboration with  Aaron Lewin , Associate Managing Consultant at Mastercard.

Before COVID-19, small merchants globally were gradually beginning to see the power of digital financial services. Transitioning to digital services helps small businesses transact faster, smarter and safer, and opens up credit options and other benefits. It also increases their financial inclusion, which gives them the tools to achieve financial security and grow their businesses. Yet despite these benefits, many micro and small enterprises have been slow to move past their traditional, cash-based operations.

But then the pandemic struck, bringing a new awareness of the drawbacks and dangers of relying on cash. Suddenly, digital access to financial services was more than a “maybe someday” — it was an urgent priority.

In the early months of COVID-19 shutdowns,  BancoSol  in Bolivia — the first regulated commercial bank in the world dedicated to micro and small entrepreneurs — saw its digital transaction volumes rising. It soon realized that speeding up its digitization efforts would be key to a lasting recovery for Bolivia’s small merchants, by enabling BancoSol to stay in touch with its customers and continue to support them throughout the pandemic. BancoSol serves 1.5 million microentrepreneurs in Bolivia, where the informal small business sector employs  more than half the country’s population , the majority of whom still operate in cash. By shifting its many microentrepreneur customers to digital services, the bank could help them weather the pandemic.

BancoSol also realized that these businesses’ long-term resilience would be enhanced if they maintained their usage of digital financial services even after the crisis, so it committed to making this new trend stick. The only question was: How?

An answer to that question came via a  first-of-its-kind partnership  between Accion and Mastercard, which aims to empower microbusinesses to join and benefit from the digital economy, while boosting their financial inclusion. Over the past year, the partners have been supporting BancoSol to integrate responsible data use by the organization in order to better serve their customer base of microentrepreneurs.

Like many microfinance organizations, BancoSol has years of customer data. But it often didn’t know what to do with all that information. To help the bank derive data-driven insights with the objective of expanding financial inclusion for microbusinesses in Bolivia, 40 Mastercard volunteers in Bogota, Colombia and Arlington, Virginia gathered virtually in a 36-hour “datathon.” The goals of the exercise were to understand how to enable digital adoption by more BancoSol customers, better serve them with more products and retain them over the long term. While planning for the datathon had begun prior to the pandemic, its findings proved to support BancoSol’s efforts to help its customers recover from the crisis and build financial resilience. The datathon developed the methodologies and a proof of concept for how BancoSol and other microfinance institutions can take a more data-driven, customer-centric approach. Below are the three steps it identified for tapping into customer insights to better serve the needs of micro and small business customers.

 

Using data to improve digital financial services for micro and small businesses

Start by understanding your typical digital customer:  Analyzing customer banking patterns can help identify customer segments that are most likely to go digital. In BancoSol’s case, data-driven insights indicated that its typical digital app customer was more likely to be female, and more likely to be younger compared to the average BancoSol client. By better understanding the typical digital customer, BancoSol can prioritize the customer segment that may be most-inclined towards digital adoption.

Equip loan officers with insights to match customers with products that meet their needs:  The datathon analysis indicated that app users made nearly twice as many deposits as other users — linking digital adoption with increased usage. As  research has shown , greater use of financial products, whether that’s insurance, savings or credit, makes small businesses more resilient to shocks like COVID-19 and also ensures the bank’s own sustainability. Equipped with these kinds of insights, BancoSol was able to streamline the app experience to better match customer expectations and develop clear messaging for loan officers to better communicate key benefits of going digital.

Retain customers by being proactive, not reactive:  The datathon also offered insights on customer retention enabling the bank to reduce attrition by proactively engaging customers before they begin to disengage. The data-driven insights also suggested that a digital connection can improve retention in the absence of an in-person connection — a critical benefit in this era of social distancing.

 

Helping more financial service providers reap the benefits of data

Insights like these can help more inclusive financial service providers use their data to become more customer-centric. “The data was always there,” said Carlos Otalora Martínez, national manager of information technology at BancoSol, referring to the bank’s customer data. “But now we see it in a different way, with more value. This fact led us to delve into organizational changes to better leverage the data, as well as ensure that the data is structured, clean and available for consumption — actions that we are already taking with the impetus provided by the datathon exercise.”

As a next step, Accion plans to develop a playbook outlining the processes and methodologies used during the datathon, so other inclusive financial service providers can use their own internal data to drive their digital transformation. The playbook will include customer segmentation concepts, as well as guidance on using statistical modeling to prioritize customers and personalize their experiences.

For BancoSol, the datathon revealed the potential of data to better support the millions of small merchants who are working hard to stay in business — and who power the Bolivian economy. If other financial inclusion-focused institutions in other markets leverage their data to similar effect, they can help to speed a digital transition that can help reduce the economic damage of the pandemic, and set micro and small enterprises on the path toward greater success after the crisis has ended.

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Argentina Becomes the Second Country That Invested the Most in Bogota in 2020

Argentina economy

Quality of human talent, as well as economic stability, were determining factors for Argentine companies to invest more than 155 million dollars in the city.

 Bogota is becoming an increasingly important investment destination for Argentine companies. According to figures analyzed by Invest in Bogota for the period 2016-2020, year after year, the number of new investment and expansion projects that arrived in the city from the Latin-American country remained constantly on the rise, except for 2020.

Last year, despite the fact that the pandemic slowed the growth that had been registered in terms of projects, Invest in Bogota accompanied six new investments or expansion of Argentine companies in the Bogota Region, a figure that made it the second country that invested the most in the capital, only below the United States.

One of the most outstanding investment projects that Bogota received during the past year was from Mercadolibre, that launched a technology and innovation Center, the first of its characteristics that the company developed in Colombia, and which, according to the company, will become the engine to promote the development and growth of its operation in the local market and in Latin America.

“In the last five years, Bogota received investments from Argentina for more than 155 million dollars through 31 projects, which generated more than 3,800 direct jobs”, highlights the Executive Director of Invest in Bogota, Juan Gabriel Pérez, who adds that the city, based on its strengths and what learned from the pandemic, has been strengthened and hopes to resume the path of growth in terms of investment this year.

Another of the outstanding examples of Argentine companies that have trusted Bogota and that have made the city fundamental for their international operations is Globant. This IT and software development company already has more than 3,500 employees in Colombia, most of whom are in Bogotá. In addition, the workforce that it has throughout the country is already equivalent to 30% of the total employees that the company has throughout the world.

Analyzing the behavior of Argentine investments in Bogotá during the last five years, 2019 appears as the period in which the largest number of projects arrived (nine in total), with companies in sectors such as software and IT services, corporate services, and textiles, mainly.

In 2021, Invest in Bogota expects to carry out at least two virtual campaigns in which it will promote investment by Argentine companies in sectors such as information technology and services outsourcing, creative industries, life sciences, value-added manufacturing and infrastructure.

For these reasons, Argentine companies invest in Colombia:

Conditions such as economic and political stability, as well as the country’s good investment climate, are usually decisive for international companies, including Argentine ones, which decide to locate in Colombia and in its capital.

“Colombia, without a doubt, and I have been saying this for 20 years in this BPO sector, has a series of benefits and virtues that make the country a very attractive place for investment”, highlights the CEO Apex America Colombia, Álvaro Pinzón, who includes in this list aspects such as labor legislation, the quality and adaptability of human talent and the geographical position of the country.

Apex America, an Argentine service outsourcing company that arrived in the country in August 2019 and that has invested about 10 million dollars, has found in Colombia and Bogota the ideal destination not only for its customer service operations, but also for the development of technological and digital solutions such as virtual agents and conversation analysis tools, both in voice and written, which are used to improve the consumer experience.

“At this moment in which the economic reactivation is advancing, we see in foreign investment a pillar of development, growth and opportunities. Colombia has a wide potential for the arrival and diversification of Argentine investment in our territory with tax incentives, clear rules and legal security, in addition to providing an export and near-shoring platform, thanks to the 17 current trade agreements that allow us to access a market of more than 1,600 million consumers in the world”, said Flavia Santoro, president of ProColombia.

Thanks to the international trade agreements signed by Colombia with other countries, companies located in Bogota have direct access to the Colombian market – of US $ 271 billion – one of the largest and most dynamic in Latin America.

“It is logical to be in Colombia, a country that has given great importance to sectors such as BPO and that allows you to have a different commercial position than other countries in the region can give you. Emphasizing Bogota, this is a city located in the center of the continent, with very good air connectivity, access to international markets thanks to the country’s free trade agreements and ethical and well-trained people, factors that make it easier to think about scalable operations”, adds Martín Ruiz, Legal and Corporate Affairs Manager of Skytel, a BPO company with headquarters in Buenos Aires and which has 400 employees.

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Cuba Accesses US$23.9 Million Grant From Green Climate Fund For Coastal Resilience Project

Cuba

The Green Climate Fund (GCF) approved US$23.9 million in finance for a coastal resilience project along Cuba’s southern coastline.

GCF financing will be provided during the project’s first 8 years and will complement US$20.3 million of dedicated financing that will be provided by the Government of Cuba for the implementation of an ecosystem-based adaptation approach for coastal protection. The 30-year ‘Mi Costa’ project will enhance climate resilience for over 440,000 Cubans and protect vulnerable coastal habitats.

Delivered by the Environment Agency of the Cuban Ministry of Science, Technology and Environment (CITMA) with support from the United Nations Development Programme (UNDP), the innovative project will accelerate the ambition of the Cuban Government’s contribution to the Paris Agreement, enhancing ecosystem-based adaptation approaches for 1,300 kilometers of coastline across 24 municipalities. It will also provide an important basis of support for the implementation of the “State Plan to Manage Climate Change ‘Tarea Vida’ (Life Task).”

The island nation of Cuba is highly vulnerable to the impacts of climate change. And while the Cuban Government has made impressive gains towards sustainable development, coastal erosion, flooding, saline intrusion, drought and sea-level rise, threaten these hard-won economic and social gains.

“Impacts from these climate drivers pose an existential threat to coastal settlements and communities. With funding from the Green Climate Fund and support from UNDP, this new project will provide valuable inputs to the Government’s work under Tarea Vida. Together these efforts will help vulnerable populations adapt to risks brought on by climate change,” said Dr. Odalys Goicochea, Director, General Environment Directorate of CITMA.

Projections show that if no intervention is made by the end of the 21st Century, up to 21 coastal communities will disappear entirely in Cuba, with 98 more severely affected by climate-related threats.

Hurricanes have also extensively damaged infrastructure across the island. Hurricane Matthew crossed the eastern end of Cuba in October 2016, causing over US$97 million in damages (2.6 percent of GDP). Hurricanes Ike (2008) and Sandy (2012) cost US$293 million (12.05 percent of GDP) and US$278 million (9.53 percent of GDP) respectively.

“By taking cost-effective ecosystem-based approaches, this innovative project will protect and restore natural habitats, reefs, seagrasses and mangroves, and help communities to protect their environment from the present and future risks posed by these severe tropical storms and hurricanes, sea-level rise and other climate change related risks. A key aspect of the project will be its focus on working with communities and local authorities to fully understand the value of ecosystems to their own resilience and livelihoods,” said Dr. Maritza García, President of the Environment Agency.

In all, the project will restore over 11,000 hectares of mangroves, 3,000 hectares of swamp forest and 900 hectares of grass swamp. These steps will improve the health of over 9,000 hectares of seagrass beds and approximately 134 kilometers of coral reef crests – essential protections from rising seas and storm surges. The project’s integrated ecosystem-based approach will allow coastal ecosystems to act as a layer of protective barriers to climate change impact seen in the form of coastal erosion and flooding while managing saline intrusion.

“The interventions on ecosystems and with the participation of communities will be reflected in the benefit of more than 1.3 million of inhabitants. “Mi Costa” will be a critical contribution to Cuba’s efforts in achieving the Sustainable Developments Goals set in the 2030 Agenda,” said Ms. Maribel Gutiérrez, the UNDP Cuba Resident Representative.

“Mi Costa” builds on the impacts of a highly successful coastal resilience project financed by the Adaptation Fund and implemented also with the support of UNDP and Environment Agency.

This new project will enhance adaptive capacity for vulnerable coastal communities on Cuba’s southern coast by rehabilitating coastal land and seascapes, and their interlinked ecosystems and hydrology, replanting and restoring mangroves and reefs, and strengthening local climate governance and approaches for communities living on the frontlines of the climate crisis. It will be benefitted by leveraging the support of local centers for environmental education, capacity building centers as well as local and national coordination mechanisms as part of the project’s long-term approach to manage climate change.

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