GENERAL OVERVIEW:
The growth pace in Latin America has been very high in 2004, an average of 5%. Except for Haiti, all the other countries reported a growth, and Uruguay and Venezuela were in the lead. Prospects for 2005 are encouraging, although less optimistic (around 4%). The question is whether this growth level can remain stable in the future, due to the structural problems in the region and what could happen if the international scenario is not as favourable.
Three regional trade blocks are working towards a consolidation: CAFTA (Central America), CAM (Andean Community) and MERCOSUR. As for the Free Trade Area of Americas - FTAA (ALCA in Spanish) implementation (a possible trade integration of all the Americas) USA's strategy has been to sign Free Trade Agreements with most Latin American countries. So far, Central America seems to be the closest to Washington’s interests, and MERCOSUR the one furthest away. That is the reason why USA has launched a harsh attack against Mercosur (Brazil, Argentina, Uruguay and Paraguay) making Mercosur responsible for the fact that the FTAA process has been delayed.
The Southern countries are reluctant to believe in the praise of free trade made by promoters of the FTAA, fearing the word ‘trade’ is translated into a one-way street, because of the protectionism ruling in the rich northern hemisphere and the efforts being required from the South which is notably poorer and, where one third of the people live on less than two dollars a day. An important fact is an agreement recently signed by the Andean Community and MERCOSUR blocks, leading to the creation of the South American Nations Community (CSN). Chile prefers to consolidate its opening, to remain distant on an equal level and to negotiate with everybody.
In the institutional political field the situation in Bolivia is a matter of concern which can lead to a possible territorial split. The rich east zone called Santa Cruz de la Sierra does not want to continue benefiting the poor people in the highlands and in the poorest areas which, furthermore, represent different ethnic groups. This is an expression of autonomy which is not new and has made it difficult to achieve an integration of the Bolivian territory. Parliament must decide on a referendum to discuss autonomy. At the same time, native movements are fighting to attain their autonomy in Ecuador and Southern Peru.
The relationship between Venezuela and Colombia has deteriorated and there have been limits and sovereignty disputes once again. The increasing tension between these two countries was caused by the capture of a Colombian guerrilla leader. Brazil and Peru assisted in the solution of the conflict.
Leftist parties are very present in countries such as Uruguay and Nicaragua and the moves of President Hugo Chavez in the region are still causing fears that his ‘populism’ may expand towards other countries.
Political parties in Latin America are amongst the most corrupt ones in the world, according to the statements in a report issued by Gallup International for the Transparency International organization(TI). The world ranking is led by Ecuador and Argentina; India and Peru share second place. Bolivia, Brazil, Costa Rica, Mexico and Nigeria are in third place; and South Korea and Indonesia are fourth. The polled people identified unemployment and lack of safety as the biggest problems, followed by corruption and poverty.
Migration is still a problem. In the last ten years, 73 million Latin Americans have migrated to neighbouring countries and 20 million have migrated to countries outside the Region.
Economic Indicators for FIDAP region February 2005 - eifidap.pdf
FIDAP Central America and Caribbean:
Costa Rica: The imprisonment of two former presidents of the Republic on grounds of illegal acquisition of wealth and the bad health condition of the current president are affecting the investment climate.
Heavy floods increased unemployment in the most important banana plantations, causing social problems. The bill which was meant to make working hours more flexible, extending the daily maximum working hours from 8 to 12, and a 4-day working week with 3 days off, has failed.
In Guatemala there has been an increase in consumption and exports have grown by 2.6% in 2004. There could very well be a similar or even larger increase in 2005, derived from the accession to CAFTA, an increase in private investments and the results of structural changes that are intended to increase competitiveness and productivity.
The country’s structural poverty continues being a key issue in the agenda of the government that took office a year ago. This government is trying not to lose its popularity and has focused on development, educational programmes, health and support of agricultural activities, which are the backbone of the Guatemalan economy.
Nicaragua: In spite of the improvement in the economy (4.2%), the employment level has not grown at the expected pace. The wages paid to workers in the ‘maquillas’ (giant sweatshops) are the lowest in Central America and are equivalent to US$ 0.27 / hour. In Costa Rica the pay is US$ 1.50/ hour, in El Salvador US$ 1.30/hour and in Honduras, US$ 0.87/hour.
The new constitutional amendment grants the National Assembly the power to ratify ministers and other government officials, taking these powers away from the President. This is creating a gradual transition from a presidential system to a parliamentary system for these appointments.
The Constitutional Liberal Party (PLC) and the National Liberation Sandinista Movement (FSLN) negotiated an Agreement of political and economic interest, which includes the appointment of officials for important public positions. In the last municipal elections, most mayors’ offices in the country were won by Sandinista candidates.
New labour laws on Vested Rights, amendments to the Social Security Law and amendments to Cooperative companies law were passed.
Panama has a new President: Martin Torrijos. Tax amendments, which mean an increase in taxes paid by companies and professional employees, without affecting labour law, were passed. This year, the minimum salary will be revised.
There was a 30%¨devaluation of the local currency In the Dominican Republic and inflation decreased by 2 %, and the minimum salary was increased by 30 %.
Agreements with Club de Paris and with IMF were achieved.
FIDAP Andina:
In Colombia the government ordered a 6.5% increase in the country-wide minimum wages. These wages are earned by 26% of all Colombian workers. Unemployment has decreased slightly, now being 1.3% less.
The controversial Colombian labour law amendment which was implemented two-and-a-half-years ago has not presented a positive balance. Its intention was to reduce labour costs for companies, protect any unemployed workers who had lower incomes and change the Family Welfare System.
The contribution of this Labour Amendment to generate employment and to reduce unemployment has been marginal because company compliance with these programmes has been low and the reduction in labour cost of Colombian companies has not been relevant.
Ecuador’s government achieved a new majority which changes the Election Supreme Court, Supreme Court of Justice and Constitutional Court; this is causing country-wide tension, with protests which are quiet so far. Up to now, the increase in workers' wages has not been approved by the government, which makes it necessary to hold two-party meetings between employers and employees. Six sections of the new Social Security Law were declared to be unconstitutional, jeopardising the whole social security system.
Peru increased its exports level by 33%. There will be a change in the cabinet, and the President has shown his intention to push up the social aspect and fight extreme poverty.
A new general Labour Law is being discussed and a labour flexibility proposal was presented, in order to reduce annual holidays from 30 days to 15 and to increase daily working hours from 8 to 12; this has caused intense discontent among workers.
Venezuela: Oil prices remained over US$ 35 a barrel, which is giving the country the largest inflow of foreign currency for oil. The GDP was up by some 15%, there was a strong economic reactivation and an important decrease in inflation.
A national referendum confirmed President Chavez in his position, despite the fraud reports which are still under investigation. The power of the current president and his party were also consolidated in the recent regional elections. Political instability and high polarisation continue to exist, while the leadership in the opposition parties has weakened.
The new Criminal Code was passed, together with a new Supreme Court of Justice law and a law regulating the contents of radio and television programmes. All these laws tend to consolidate and concentrate political and judicial powers in the executive, to establish censorship and to impose penalties for any political dissidence. Labour law was fully amended. Tax contributions were increased and monitoring over state control agencies was enhanced.
FIDAP South:
Argentina continues to negotiate its default with international creditors. It has had a good economy year with a slight reduction in unemployment and a recovery in the lowest wage levels. However, this happened at the expense of hard labour union negotiations, increase in labour conflicts and the participation of the government that has been granting wage increases to private company workers, which has caused an increase in labour costs and inflation.
Double compensation for dismissals will continue to be in force until unemployment figures are no longer double digits.
There has been a strong increase in compensation for accidents at work due to failures in the legal system which questioned compensations derived from the occupational accidents law; this has increased costs and may cause an endless flow of legal claims.
The economy grew in Brazil and stability continues, despite an increase in interest rates and primary surplus above the IMF's guidelines. This currency policy kept inflation under control, although it causes dissatisfaction among businessmen and restricts investments and consumption. There was a reduction in unemployment of around 2% and scarce improvements in workers’ salaries. There is an agreed amendment project to modify the labour union law and there are expectations for further discussions of a new labour system destined to encourage the creation of new job opportunities.
There are expectations of sustained economic growth In Chile, ensuring a good year 2005.The 2005 presidential race has begun.
Free trade treaties negotiation with China and India has already started. Working hours were reduced from 48 to 45/week. Although everybody sees the need to have labour flexibility, the forthcoming elections are restricting any changes for the time being.
An improvement in the economy is noticeable in Paraguay and macroeconomic indexes are favourable. A stand-by agreement with the IMF is still in full force and the agreed goals are being achieved.
Uruguay shows a major economic growth, good tax and foreign debt management, and the recession and unemployment has stopped.
A new Parliament and a new President were recently chosen; the President will be sworn in on March 1. For the first time in history, an alliance between left-wing parties has won the elections and parliamentary majority in the first election round. The new government has announced an Emergency Plan to fight poverty, which will cost about US$ 100 million.
The new Labour and Social Security Minister is a member of the Popular Participation Movement, a radical left-wing group of ‘Tupamaro’ guerrilla origin.
The newly elected authorities announced that they will implement once again the Wages Council and the bargaining of Collective Labour Agreements.
Private company workers are expecting a general salary increase in order to recover the purchasing power of salaries, while employers are afraid that any increases may affect the companies’ competitive level in the region.
CHALLENGES FOR THE HUMAN RESOURCES FUNCTION
The regional challenge is to improve the employment level and to combine the need to have more flexible and competitive labour markets with adequate social security.
Advanced talks towards the consolidation of free trade agreements in the CAFTA (Central America) and the CAM (Andean Community) areas) are prompting companies to review their strategies, processes and performance. This has to be done with a view to achieving more competitiveness and to adapt to new reality and new challenges. Some companies are closing down, others are starting a transformation process and new ones are being organised.
Political instability, ongoing changes in labour legislation, social security and taxes are generating an unstable framework for work relationships. Human resources professionals must devote their time not only to interpreting and applying these new rules, but also to advising authorities and lobbying for the cause. Some associations are working together with their national governments in order to create or re-create tax incentives related to company training.
The fact that in some countries governments are fixing minimum wages and interfering in wages and salaries or in the bargaining between employers and trade unions is creating lack of stability and generates cost problems that are affecting competitiveness.
All of this determines that mergers and acquisitions, cost and change management and communication coupled with negotiation are the key issues for human resources management in the region. It is quite usual for HR professionals to have to prioritise their time and deal with the circumstances, more than working on other key issues such as knowledge management, people development and social responsibility.
HR COMPETENCIES CERTIFICATION
There are some processes that are starting for the certification of HR competences.
APERHU (PERU) together with the Pacific University (Universidad del Pacífico) is working towards a Human Resources Competence Certification.
ADRHA (Argentina) is working on the possibility of developing a competence certification programme. If this project develops positively, ADRHA will request the cooperation and assistance of the WFPMA and other associations with expertise in the subject.
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2005 EVENTS
ARGENTINA - Asociación de Recursos Humanos de la Argentina – (ADRHA)
IV Human Management Congress - April 2006 (IV Congreso Nacional de Gestión Humana)
BRAZIL - Associação Brasileira de Recursos Humanos – (ABRH)
National People Management Congress - (Congresso Nacional sobre Gestão de Pessoas) - CONARH 2005 - August 1 - 4, 2005
CHILE - Círculo Ejecutivo de RRHH de Chile – (CERH) PERCADE Seminar - March 2005
COLOMBIA - Asociación Colombiana de Gestión Humana – (ACRIP)
XIX Inter-American Human Management Congress (XIX Congreso Interamericano de Gestión Humana) May 25 - 28, 2005
COSTA RICA - Asociación Costarricense de Gestores de RRHH – (ACGRH) Pending confirmation
DOMINICAN REPUBLIC - Asociación Dominicana de Administradores de Gestión Humana – (ADOARH) VI National Congress (IVCongreso Nacional) - May 14 - 17, 2005
ECUADOR - Asociación de Directores de Personal del Ecuador – (ADPE)
XIII National Congress (XII Congreso Nacional) - Rethinking the Human Talent in the Globalisation Era - April 13 - 15, 2005 - International Seminar - June 23, 2005
GUATEMALA - Asociación de Gerentes de RRHH de Guatemala
International Convention (Convención Internacional) - June 22, 23 & 24, 2005
NICARAGUA - Asociación de Ejecutivos de RR.HH. de Nicaragua (AERHNIC)
III Human Resources Congress (III Congreso de Recursos Humanos) - June 2006
PANAMA - Asociación de Profesionales de RRHH de Panamá (ANREH)
National Congress (Congreso Nacional) - June 2005
PARAGUAY - Asociación Paraguaya de RRHH (APARH) Pending confirmation
PERU - Asociación Peruana de RRHH (APERHU) XIV National Human Management Congress (XIV Congreso Nacional de Gestión Humana) – Sept. 28 - 29, 2005
URUGUAY - Asociación de Dirigentes de Personal del Uruguay (ADPU)
X National Congress (X Congreso Nacional) - September 2005-
VENEZUELA - Asociación Venezolana de RRHH (ANRI)
XX Venezuelan Human Resources Management Congress (XX Congreso Venezolano de Gerencia de Gestión Humana) - July 13 - 15, 2005
I Latin American Management, Legislation and Labor Law Congress - Its Impact on Development
(I Congreso Latinoamericano de Gerencia, Legislación y Jurisprudencia Laboral y su impacto en el desarrollo) - November 14 - 16, 2005
FIDAP CONGRESS - CIGEH
The FIDAP Regional Congress (CIGEH) takes place every two years; this year it will be held from May 25 to 28 in Cali, Colombia. It is being organised by the Colombian association - ACRIP. The Oscar Alvear Urrutia (founder of FIDAP) Award will be granted to the person who has contributed most to the human management in the region. FIDAP human resources management excellence and research awards will also be bestowed during the course of this Congress.
