The Growth of Latin America's `Marginal Economy'

IN a report to the recent Labor Conference in Geneva, the International Labor Organization's Director General Michel Hansenne has alerted the world community to a new trend in the developing countries - the spectacular growth of workers in the so-called ``informal sector,'' also known as ``the marginal economy.'' In Latin America alone, says Hansenne, the number of people in this sector increased by 56 percent between 1980 and 1987. What he did not say is that such an explosive increase coincided with the boom of the foreign-debt crisis, which has put such Latin American countries as Brazil, Mexico, and Argentina among the most indebted in the third world.

A number of other factors may have contributed to such spectacular growth of the sector - among them, the rapid growth of the urban labor force and the adoption of labor-saving technologies, such as computers and robots, coupled to a no less dramatic increase in population.

Often described as ``the twilight zone'' of the working world, the informal sector has developed gradually into a ``labor sponge'' that absorbs a significant number of the surplus labor in major metropolitan centers throughout Latin America.

In Mexico City, the world's largest urban conglomeration, it takes the form of both legal and illegal street fairs, in which all kinds and sizes of bits, pieces, and trinkets are for sale, or youngsters who do fire-eating acts with dangerous gasoline-drenched torches. In others, like Buenos Aires or Rio de Janeiro, the ``street children'' have created other forms of marginal economy - from shoeshining and windshield wiping to selling drugs or themselves for prostitution.

Most marginals, however, are food vendors and artisans, or they manage small vending outlets for surplus, low-quality mass products from Taiwan, Hong Kong, or South Korea. According to Hansenne and other experts, the informal sector may account for between 5 percent and 35 percent of the gross national product in many countries. The ILO estimates some 300 million people work for the marginal sector in Latin America and other parts of the third world.

Yet the sector remains largely neglected by most social planners and policymakers. Many, according to the ILO report, see it as ``a blot on the urban industrial scene, something they would prefer to sweep under the carpet in the hope that it would gradually disappear.''

The attitude is common among politicians and officials in many Latin American countries. Some still refuse to acknowledge that, as the ILO document notes, the share of informal-sector employment in the labor force rose even during the rapid growth of the 1970s.

Others, like some left-leaning economists in Argentina, blame it all on the ``adjustment'' policies of the International Monetary Fund but fail to see the role played by the lack of government programs for unemployed or unskilled manpower.

Economists have noted that the industrial restructuring of the formal sector of most economies has led in recent years to a greater decentralization of production through subcontracting, which in turn has caused an increasing number of operations to be carried out by informal-sector subcontractors.

The ILO study warns that ``there is no longer any cause to believe that the informal sector is a transient phenomenon that will spontaneously fade away in the forseeable future, as jobs are created in the modern, regulated formal sector. On the contrary, there is every reason to believe that a large and probably increasing segment of the labor force in most developing countries will be engaged in the informal sector for very many years to come.''

In many Latin American countries, red tape and corruption have forced many informal-sector mini-enterprises to operate outside the law, which also puts them beyond the pale of social protection and labor legislation. This trickles down to unorganized labor, low productivity levels, and very low income, with producers and workers in the informal sector living and toiling in highly precarious, dangerous, or unhealthy conditions.

Undoubtedly, the burden of the foreign debt - which currently looms over the region's financial horizon at more than $400 billion - had a lot to do with the rapid growth of a marginal economy in Latin America.

Some countries, like Argentina, saw their indebtedness increase from around $6 billion in the mid-'70s to $60 billion in the '80s - the latter a figure equal to the amount of capital flight estimated to be deposited overseas by Argentine investors who lacked confidence in their own country's economic stability.

Many economists, according to the ILO, are now beginning to see the informal sector as ``true indigenous entrepreneurs whose productive growth is stunted by excessive and inappropriate intervention on the part of the government.'' They also see it as a major source of low-cost goods and services for urban dwellers, with a productive potential financed out of its own resources.

Perhaps the time has come, as those experts suggest, to focus efforts on improving the income and working conditions of the millions engaged in this sector - rather than pretend it doesn't exist. This may be just another case of the many things Latin Americans will have to come to grips with in the lean 1990s.