Latin America's informal economy

22-09-2016

Informal employment affects around 130 million workers in Latin America and the Caribbean, of whom at least 27 million are young people, and represents nearly half of non-agricultural employment. Its incidence varies across the region's countries (from 30.7% in Costa Rica to 73.6% in Guatemala), sectors and population groups. Fighting informality has become a clear objective in the region. Some Latin American countries have taken big steps to reduce informality, applying a different mix of specific policies and strategies and obtaining generally positive results; however, more efforts are needed. Moreover, the current crisis can endanger this positive trend. International institutions, such as the International Labour Organization (ILO) and the EU, are also promoting measures to support the transition to the formal economy in the region, and the European Parliament has shown a special interest in this issue. Yet, formalisation in Latin America remains an important challenge, and economic growth alone is not enough to achieve it: the ILO insists on an integrated and comprehensive approach that would complement public policies with efforts by social actors as a way to achieve broad-based consensus. Experts agree that the focus should be on workers' social and labour inclusion. This briefing examines the strategies applied by five big Latin American economies – Argentina, Brazil, Colombia, Mexico and Peru – based on recent ILO studies, and looks at the results obtained thus far and the assistance provided by the EU and the ILO.

Informal employment affects around 130 million workers in Latin America and the Caribbean, of whom at least 27 million are young people, and represents nearly half of non-agricultural employment. Its incidence varies across the region's countries (from 30.7% in Costa Rica to 73.6% in Guatemala), sectors and population groups. Fighting informality has become a clear objective in the region. Some Latin American countries have taken big steps to reduce informality, applying a different mix of specific policies and strategies and obtaining generally positive results; however, more efforts are needed. Moreover, the current crisis can endanger this positive trend. International institutions, such as the International Labour Organization (ILO) and the EU, are also promoting measures to support the transition to the formal economy in the region, and the European Parliament has shown a special interest in this issue. Yet, formalisation in Latin America remains an important challenge, and economic growth alone is not enough to achieve it: the ILO insists on an integrated and comprehensive approach that would complement public policies with efforts by social actors as a way to achieve broad-based consensus. Experts agree that the focus should be on workers' social and labour inclusion. This briefing examines the strategies applied by five big Latin American economies – Argentina, Brazil, Colombia, Mexico and Peru – based on recent ILO studies, and looks at the results obtained thus far and the assistance provided by the EU and the ILO.