South America Region

There are four families of states in this region – the former Portuguese colony of Brazil, the cluster of states that were former Dutch, French and UK colonies on the NE Atlantic coast – of which only one (French Guiana) remains part of its former colonial power – the outlying Falklands (Las islas Malvinas) and South Georgia islands that are British territory (although claimed by Argentina) and the major cluster, consisting of ex-Spanish colonial states from Columbia to Argentina.

Most of the Spanish speaking states have suffered from severe economic difficulties for many years and 25% of their population is below the poverty line. On average, 56% of the region’s population did not attend education beyond secondary school and only 9% went on to University. Consequently, the region suffers substantial difficulties in filling professional jobs with the shortfall amounting to 67% in Peru, 63% in Argentina and Brazil and 57% in Columbia. Although not vast in numbers, all countries suffer from forced labour – usually involving indigenous people.

Individual countries

Argentina: A century ago Argentina was in the top ten richest countries in the world. Today it is trailing advanced nations and many aspects of the economy are under-developed.

Tough and inflexible labour regulations discourage investments and expansion and there are important skill shortages in many areas. This is partly due to high drop-out rates in higher education. Although women tend to be better educated on the whole than men, the participation rate for women is lower than men.

The informal economy accounts for 35% of the workforce and these have poor pay rates and no employment protection. Although public welfare programmes are in place, they are badly run and waste valuable resources. One other problem has been the past falsification of official statistics so that it is impossible to know in a precise way how bad the economy has become.

Bolivia: 60% of the population live in poverty. The country’s 5.3 million employed workforce are split evenly between the formal and informal economies and 47% of those aged 15-24 are out of work.

The primary employment law is the Labour Act (Ley General del Trabajo) which dates from 1942. This covers working conditions, the role of collective agreements and workplace health and safety. Unionisation stands at 11% of the national workforce. Trade unions may operate in companies with 20 or more employees – provided that more than 50% of the workforce agree to them representing their interests.

Brazil: The largest south American country with half the population of the region. In spite of economic difficulties, the jobs market has remained upbeat and severe skill shortages are evident in many sectors.

The working population is continuing to grow, although there is a mismatch between education and jobs. The scope for Brazil to recruit from other South American countries is limited by the linguistic divide between Portuguese and Spanish.

Law No. 13,467/2017 has amended the Brazilian Labor Code (Consolidação das Leis do Trabalho) and introduced much needed flexibility into the labour market. It will give much scope for profitable growth. The only major downsides for Brazil is its social instability, levels of corruption and ever-present gun-culture which may scare off many potential overseas investors.

Chile: Article 19 of the Labour code states that 85% of employees in a company must be Chilean, unless they employ 25 or less employees. Article 20, however, sets out a number of exceptions to this rule.

Formal employment is discouraged by harsh severance rules for dismissal without cause. Compensation can amount to 330 days’ pay (after 11 years of service). The maximum working week is 45 hours and employment rights are generally upheld. The informal sector accounts for around 15% of the Chilean non-agricultural labour force.

Columbia: The country has suffered from half a century of internal conflict and social inequality is high. Nevertheless, it is one of South America’s fastest growing economies.

Principally holding it’s economy back now is a severe skills shortage, with a 90,000 shortfall in telecommunication and software engineering professionals alone. The country’s principal exports are oil and coal and reforms of the financial system have helped growth in construction jobs.

The future depends on gaining peace with the FARC guerrillas who have hijacked oil facilities and caused much investor reluctance in recent years. It also depends on improving the tertiary educational system to increase the generation of technical skills.

Ecuador: The Labour Reform Law of March 2016 sought to improve youth unemployment, introduce a new unemployment insurance system and allow employers to reduce workers’ hours to cope with economic downturns. The country has a plentiful supply of unskilled and semi-skilled labour, but lacks higher skilled and professional talent.

Falklands (Las islas Malvinas) and South Georgia: These remote islands remain British overseas territories, although the Las islas Malvinas is claimed by Argentina. The Falklands has a tiny, largely agricultural, community and South Georgia has a small resident population of about 30 people. Both island groups have their own legal systems based primarily on UK law.

French Guiana: This is an overseas department of France. It is France’s second largest region and part of the European Union. It is South America’s most prosperous territory (in terms of per capita GDP), uses the euro as its currency and applies French law in the same way of other regions of France.

Guyana: This ex-British colony is now fully independent. It is sometimes thought to be part of the Caribbean rather than South America, but it is very much part of the greater land mass. Its native language is English and it has a labour force of around 450,000. Its principal industries are the production of sugar, timber, bauxite and gold. It also has a significant rice milling industry.

Paraguay: Following a major economic crisis in 2012 the country began its recovery, only to be hit by social unrest and an upsurge in the informal economy. 20% of the working population claim they are unemployed and hydropower ranks very high in the components of its GDP. Alongside power generation is the country’s other major economic sector – smuggling.

The pressures on small farmers is causing a rural exodus and those that remain have to work for a small number of major landowners at very low wage rates. Rural workers find it very hard to find jobs in Asunción. Fraud is rife and is undermining the country’s fragile economy and democracy.

Peru: Mineral rich Peru gained great advantages from an export boom in the first decade of this century, but long-standing structural problems and corruption has depressed growth.

75% of workers operate in the informal economy and this is being largely driven by rigid labour laws. This includes a right to compensation of 1.5 months per year of service for any successful dismissal claim found to be “unfair”. Employers are also obliged to pay 13th and 14th month fixed bonuses and a wide range of other benefits.

An attempt to introduce major necessary labour reforms was put on ice in 2017 – due to strong protests by the economically powerful mineworkers.

Suriname: The country suffers a great deal from inflexibilities largely inherited from the Netherlands – like the prohibition – under the Dismissal Permits Act – from shedding labour without first obtaining official permission.

In recent years, there has been an influx of Haitians to work in the agricultural sector, following the refusal of local workers to accept low rural wages. The youth unemployment rate 23%. Labour laws appear to be largely upheld by the industrial inspectorate, but labour statistics are inadequate.

Uruguay: This country has the best educated population in Latin America – although the general comparative standard across the vast region is very low.

The normal working week is 48 hours although, at 250% of the normal hourly rate, the overtime premium for working on a normally non-working day is prohibitive. Then there is also the Aguinaldo – a 13th month salary paid in two halves in June and December each year.

One interesting feature of employment law is that during an employee’s first year of employment they are not entitled to annual holiday – as they generate entitlement to holiday in the following year. The informal economy is fairly low by Latin American standards at just 20% of the working population.

Venezuela: This failed state now appears to be beyond recovery. Runaway inflation, corruption and bad government have largely sealed its fate.

Proportion of global land area: 12%
Proportion of global population: 6%
GSI Modern slavery (Forced Labour) 0.01 % to 0.65%

World Bank rating (doing business): 58/190 Peru, 152/190 Bolivia
FedEE overall employment potential rating: 6/10
FedEE regulatory rating: 9/10

Minimum wage rates (selected states)
– Argentina: 9,500 Argentinian pesos a month (1.1.2018)
– Brazil: R$ 937 a month (1.1.2017)
– Chile: 276,000 pesos a month (1.1.2018)
– Colombia: COP$781,242 per month (1.1.2018)