1. Healthier Firms for a Stronger Recovery: Policies to Support Business and Jobs in Latin America and the Caribbean
- Author:
- Andrew Powell and Liliana Rojas-Suarez
- Publication Date:
- 08-2022
- Content Type:
- Special Report
- Institution:
- Center for Global Development
- Abstract:
- This report—the product of a joint working group convened by the Center for Global Development and the Inter-American Development Bank—focuses on firms and labor markets in Latin America and the Caribbean during the COVID-19 crisis and the highly uncertain recovery phase now underway. The ongoing Russian war in Ukraine, volatility in international financial markets, and fears of global stagflation (low growth and high inflation) combine with the impacts of the pandemic to make the economic environment particularly challenging. Through a balance sheet analysis, the report describes how larger firms have navigated the crisis by cutting back on variable costs and investment. It also focuses on small and medium-size enterprises (SMEs), which appear to have suffered more in terms of closures and restrictions on credit access. The impacts on labor markets were unprecedented, with steep falls in employment and participation rates. A key question is whether the reallocation of resources, favoring firms in sectors that were hit less hard and able to take advantage of digital technologies, will persist. Key dangers are that informality is higher than ever, that productive resources remain trapped in small and less productive or ultimately unviable enterprises, and that firms are not rebuilding their capital stocks quickly. Drawing on an analysis of firms and labor markets, the report provides a set of recommendations for policymakers in the region and suggestions for international financial institutions to assist productive firms to invest, support the growth of new firms, and enhance labor market performance.
- Topic:
- Development, Economics, Finance, and Banking
- Political Geography:
- South America, Latin America, Caribbean, and North America