RIO DE JANEIRO, BRAZIL – How can governments control activity in an economy over which they have never had control? This is an urgent question for those in charge of the developing world, with a GDP of US$35 trillion (R$175 trillion), in the midst of the coronavirus pandemic.
From the favelas in Manila to remote villages in Colombia, some two billion people make a living in the casual economy, virtually ruleless and untaxed. The effort to contain the spread of the disease that has already infected over one million people will soon hit countries affected by fragile institutions, limited resources, and corruption.
“How am I going to cope if everything stops?” asked Caetano Sousa do Nascimento, 50, who earns about R$60 on a busy day selling ‘cocada’ (traditional coconut candy) in the outskirts of Brasília and lives off the informal economy, as do some 40 million other Brazilians. “People have to get back to their lives. Stopping everything is not the solution”.
Emerging countries, which account for more than 90 percent of the world’s casual jobs, have been pressing for the shutdown of a vital segment of economic activity that is disproportionately vulnerable to disease, less equipped to survive a long blockade and often out of reach of government support programs.
An International Monetary Fund study estimated that the average size of the informal economy in 158 countries was equivalent to 31.9 percent of official GDP between 1991 and 2015. If this proportion was maintained in 2019, informal sectors accounted for nearly US$30 trillion.
Emerging threat
In developing countries, the situation of casual workers is aggravated by the combination of large favelas, numerous families living together in small shanties and lack of testing. New epicenters of coronavirus are starting to emerge in places like Guayaquil, Ecuador, which was taken over by the army last week.
The economic emergency has led the G-20 to shift its focus this week towards the need for aid to developing countries. During a virtual meeting on Tuesday, G-20 finance ministers and central banks said they intended to address the debt vulnerabilities of emerging economies, allowing them to focus their efforts on dealing with the threat.
Without a financial safety net and with little access to health services, the dilemma of India’s casual workforce of 450 million is one of the most glaring examples of how social inequality threatens to undermine global efforts to contain the virus.
Most of these men and women earn, on average, only US$2 a day. They do not have the option of working from home, taking time off, or avoiding public transportation to exercise social distancing.
This week, small traders in Nigeria were preparing for the blockade in the country’s two largest cities, Lagos and Abuja. Africa’s most populous nation surpassed India as the country with the highest number of people in extreme poverty in 2018, and the casual sector accounts for an estimated 65 percent of the economy.
Usman Saleh, a trader in Abuja’s Wuse market, had just received two trucks of fresh strawberries worth US$5,100 when he learned the government would close all businesses. The fruit is likely to be lost, he said, and the loss could end up ruining his business.
“What am I going to do now?” he asked. “I can’t keep all this in my freezer, I just don’t have the space.”
Relief measures
Organizations representing millions of casual workers have begun to request a slice of the huge incentive packages announced.
A group of ten organizations in South Africa, representing almost five million workers, have asked the government to establish a “cash benefit” that would allow casual workers to complete quarantining without facing economic hardship.
The groups also called for large-scale distribution of masks and gloves, as well as soap and hand sanitizer in public areas with high casual labor activity.
Violence
Hundreds of Moroccans protested against the implementation of emergency measures, marching and singing religious songs the day after the blockade was implemented in Fez, Tetuan, and Tangier.
Morocco, a North African country where 60 percent of the workforce has no health insurance, has imposed strict restrictions on mobility in public areas that have emptied markets and traditionally busy streets.
“The blockade creates a difficult situation for the entire North African region because filling the street is the main feature of a significant casual economy,” said Rachid Aourraz, an economist with the MIPA think tank in Rabat.
Impact
In Colombia, the government is trying to enforce a blockade until mid-April but is facing resistance from workers who barely earn a living.
The country’s casual labor force has increased sharply in recent years with nearly two million migrants fleeing Venezuela’s economic collapse. Most have no visa, and the mass shutdown of restaurants, beauty salons, and other businesses leaves many of them penniless and under threat of eviction.
In some areas of rural Colombia, the state hardly exists, and the rules are dictated by cocaine-financed militias.
“In countries with large casual economies, a complete blockade can force a person to be closer to someone who can infect them,” said Priyanka Kishore, head of India and Southeast Asia at Oxford Economics in Singapore. “And if the blockades cannot control the spread of cases, then the blockades will continue, aggravating the economic and social crisis.”
Source: Exame