Cuba: Private Sector Gets a (Tentative) Boost

By Ricardo Torres*

Morning Street Market in Trinidad, Cuba/ Bud Ellison/ Flickr/ Creative Commons License

The Cuban government has announced measures that represent a significant shift in its treatment of the private sector, but the reforms will not have the desired impact without supporting legislation and other steps. In one of its more important announcements on reform, authorities abandoned their focus on listing permitted categories of work, and instead issued a list of prohibited activities – leaving open the rest of the economy for private individuals.

  • On February 11, the Labor Ministry issued for public discussion a list of 124 activities, based on an international classification of job categories, that will remain off-limits for cuentapropismo (self-employment). Among the most prominent professions that will remain under state control are journalists, lawyers, accountants, architects, and engineers – as well as some positions in the value chain in tourism.
  • The reasons for these restrictions range from political and social sensitivity; poor coordination and improvisation among various agencies that were working on the initial drafting of the list; and the protection of the narrow interests of various industries, such as in some parts of tourism.

The benefit of these prohibitions is questionable from the perspective of national economic development. The Cuban economy appears likely to continue shifting toward specialization in services, but the next stage in that process will require expansion into areas that are more complex, more deeply integrated into the productive system, and more focused on foreign markets. This stage will require the skills of Cuban professionals, many of whom today, seeing few good prospects at home, are leaving the country frustrated in search of opportunities to use their talents and build a good life for themselves elsewhere. For a country with a demographic profile that’s already adverse, the brain drain will be even more damaging.

  • The International Labor Organization (ILO) reports that, in medium- and high-income countries, companies with up to nine workers represent 32‑38 percent of all employed persons, while another 42 percent work in entities that have between 10 and 49 employees. Cuban labor, in sharp contrast, is divided into state enterprises (with an average of 800 workers); agricultural cooperatives (94 workers); urban cooperatives (typically 39 workers); and cuentapropistas working alone or with one partner. This labor structure is simply not adequate for future needs.

The new measures raise other questions about the objectives of the reforms. Of the 600,000-plus cuentapropistas, some 100,000 are de facto companies – without full legal personality and its protections. Cuba lacks a solid framework for the development of the private sector. Consideration of the small and medium enterprise law promised by the government years ago is still in limbo, with no clear date. Cuban law also does not clearly distinguish between subsistence production and dynamic undertakings, nor between owners and workers. It does not establish the formal channels necessary for communication with the sector, nor how to apply laws dealing with social rights, environmental protection, and similar requirements. There is also no sign of specific legislation permitting work by truly independent workers and cooperatives.

The challenge ahead lies in the fact that the political documents for these and other reforms over the years – such as Conceptualización (during the 7th Party Congress in 2017) and “Plan 2030” present only a narrow, schematic concept of private-sector development. The omissions and ambiguities in them are huge. Without effective follow-up, the full intent of even these new steps will not be realized – and progress will yet again be delayed. A holistic vision of reform and its objectives is necessary now more than ever. No one knows, however, if the Cuban leadership has the appetite and political space within the party and government bureaucracy to make it happen.

March 15, 2021

* Ricardo Torres is a Professor at El Centro de Estudios de la Economía Cubana at the University of Havana and a former CLALS Research Fellow.

Brazil in 1999: The Impact of Rigid Labor Regulations

By Jennifer P. Poole and Rita Almeida*

The outside of a building in Brasilia, Brazil

Brazil’s Ministry of Labor and Employment in Brasília. / Grupo Vestcon / Creative Commons

During Brazil’s currency crisis and devaluation in 1999, stringent implementation of labor regulations hindered, rather than enhanced, manufacturing plants’ recovery and workers’ wellbeing – an important lesson to keep in mind in current debates in many countries.  In an article published in the May 2017 Journal of Development Economics (JDE), we examine the implications of global economic integration through international trade on local labor markets during that critical period in 1999.

  • Many economic policymakers agree that reforms in the latter half of the 20th century, such as liberalizing trade relations and encouraging foreign investment, have been powerful drivers of efficiency gains, income growth, and consumer choice around the globe. At the same time, however, there is agreement that – as firms adapt to a more competitive global environment – the gains are often accompanied by short-term costs for workers in terms of unemployment and income risk.  Policymakers have to weigh the broad economic benefits from globalization and technological change, on the one hand, against workers’ opportunities and security on the other.

A micro-econometric estimation analysis of detailed, confidential, and proprietary micro-data sets – collected in part while visiting the Brazilian Labor Ministry – reveals a causal impact of trade reform on employment.  Brazil’s policy environment of strict labor market regulations (e.g., hiring and firing costs), coupled with its dramatic trade liberalization and currency devaluation, make it a particularly appropriate setting to study the implications of globalization on employment opportunities in a middle-income country.  As in many countries, much of the de jure labor market framework was established on a national basis in Brazil (in the Brazilian Federal Constitution of 1988), but de facto labor regulations – the varying levels of implementation through labor inspections, fines, and other processes in different locales – are heterogeneous.

  • Administrative data on the enforcement of labor regulations during the 1999 currency crisis, a shock to trade openness, show that the way trade affects employment largely depends on the stringency of de facto labor regulations that companies face. The impact of the currency devaluation – widely predicted to expand employment by facilitating access to foreign markets and weakening import competition – was less significant in plants facing strong labor enforcement than in those facing more lax enforcement.  The findings suggest that stringent labor regulations limit job creation and lower productivity gains.
  • Not only was the efficient reallocation of labor in response to shocks inhibited by strict de facto labor market regulations; rigid enforcement also restricted the within-plant potential for productivity gains. The data reveal that regulations, for example, may limit plants’ ability to introduce new goods or investment in more complex production technologies that might have higher value-added.  The burden of having to retain unproductive workers, making plants less able to compete, is another possible explanation for weak productivity gains.

Previous research – arguing that weak enforcement leaves regulations ineffective – ruled out the possibility of labor regulations as an explanation for slow labor adjustment to trade reform.  But our research shows that flexible regulations maximize the gains of reforms such as trade liberalization.  As middle-income countries continue to face a globalizing and technologically advancing world economy, their strict labor market policies, limiting adjustment and reallocation, may have potentially distortive, unintended consequences.  The trade-off between job security, on the one hand, and productivity and growth is already one of the most prominent public policy debates worldwide.  Regulations designed to protect workers may actually further reduce employment as costs increase.  Countries must show flexibility, while enhancing education and training programs, to benefit fully from changes driven by the global economy.  As populist, protectionist policies gain influence in the world, policymakers should know that increasing the flexibility of de jure regulations will allow for increased job creation and thus offer broader access to productivity gains.

March 7, 2018

*Jennifer Poole is Assistant Professor of Economics, School of International Service, and Research Fellow at the IZA Institute of Labor Economics and the CESifo Research Network.  Rita Almeida is a Research Fellow at the World Bank and the IZA Institute of Labor Economics.  Their article is titled “Trade and Labor Reallocation with Heterogeneous Enforcement of Labor Regulations.”

Mexico’s Teachers Between a Rock and a Hard Place

By Christian Bracho*

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Members of Mexico’s Coordinadora Nacional de Trabajadores de Educación (CNTE) at a mass mobilization in 2013. / Eneas De Troya / Flickr / Creative Commons

Teachers in Oaxaca and other Mexican states are increasingly fearful and resentful of both their union and the ruling Partido Revolucionario Institucional (PRI).  Since the 1970s, Mexico’s Coordinadora Nacional de Trabajadores de Educación (CNTE) has operated as a formalized dissident caucus within the Sindicato Nacional de Trabajadores de Educación (SNTE), the national union that has been an essential part of state machinery since the 1940s and strongly aligned with the PRI.  CNTE rallied for many causes, such as union democratization, regional autonomy, and economic justice, and enjoyed the most popular support in the 1980s.  As they accumulated power in the 1990s in states like Oaxaca, CNTE leaders turned to neo-corporatist strategies to incentivize teachers’ participation in union mobilizations.  An extensive point system, for example, rewarded teachers for going to marches, camping out during strike periods, and attending rallies in Mexico City; teachers who failed to participate in a minimum amount of activities lost union privileges and benefits.  By 2005, Oaxaca’s union had split over its focus on politics rather than pedagogy.  Over the last ten years, dissident teachers have increasingly faced government pressure and violence.

  • In 2006, military police broke up a rebellion led by striking teachers in Oaxaca state, in which dozens of activists were killed. In 2013, the massive teacher strike against President Peña Nieto’s constitutional reforms – which would require states to implement national education policies – ended with the violent eviction of teachers from Mexico City’s zócalo.  In 2014, 43 student teachers in Guerrero state were massacred, and last year over a dozen protesters were killed in Nochixtlán, outside of Oaxaca’s capital city.

Although these incidents provide teachers’ unions considerable cause for continued mobilization, my research indicates that teachers in states like Oaxaca are less convinced that their ongoing struggles represent authentic political resistance.  Many say they are fulfilling syndical obligations – less a reflection of personal convictions – because attendance is recorded and assures payment.  Teachers tell me that they trust neither the government nor the union; they see government as an entrenched century-old political machine that has resurged with more impunity than ever, and the union – both nationally and regionally –as driven by special interests and cronyism.  Maestros feel they have little recourse but to fend for themselves and families.  They fear the violence that the government may visit upon them, but they also fear the public shaming they face if they criticize the union’s political tactics or support government reforms.

Education reform in Mexico is vital to improve the overall quality of teaching and learning – and to address the social and economic inequalities across the country.  Government action is essential to such efforts, but endemic corruption has stained the public’s image of national and state leaders, cultivating distrust of top-down policies.  The union is also essential to protecting teachers’ interests and challenging the hegemony of the national government, but its neo-corporatist strategies such as the point system delegitimize the activist banner waved by leaders in states like Oaxaca.  Especially with increasing symbolic and physical violence, teachers are in an impossible position, stuck between two forces they don’t trust and facing dire consequences if they challenge the authority of either the government or union.  Though dissident teachers are important to putting a check on government impunity and corruption, the union’s sustained mobilizations have negatively impacted their profession and student achievement.  While “the teacher fighting is also teaching” – a common refrain in Mexico – teachers must also be free to step away from the march and into the classroom.

March 16, 2017

* Christian Bracho teaches in the International Training and Education Program at American University’s School of Education.

Does Trade Incentivize Educational Achievement?

By Raymundo Miguel Campos Vázquez, Luis-Felipe López-Calva, and Nora Lustig*

Female student walking by building

A student walks around Preparatoria Vasconcelos Tecate. / Gabriel Flores Romero / Flickr / Creative Commons

Mexico’s experience with free trade has challenged one of the tenets of faith economists know well from reading early in their careers David Ricardo’s Principles of Political Economy and Taxation: that “the pursuit of individual advantage is admirably connected with the universal good of the whole” and that “[trade] distributes labor most effectively and most economically.”  Under this principle, “wine shall be made in France and Portugal; corn shall be grown in America and Poland; and hardware and other goods shall be manufactured in England.”  Mexico reminds us that while these benefits exist in the abstract, there are trade-offs to be faced—that there are, potentially, social and individual costs induced by trade liberalization.

In a recently published paper entitled “Endogenous Skill Acquisition and Export Manufacturing in Mexico,” MIT economics professor David Atkin shows the ways in which individual people experience trade and how it affects their decision-making – sometimes in ways that may not necessarily be socially desirable.  It analyzes a time period (1986-2000) during which Mexico underwent major economic transformations, including a rapid process of trade liberalization after 1989 and the introduction of the North American Free Trade Agreement (NAFTA) in 1994.  Analyzing data for more than 2,300 municipalities in the country, the paper tells us that young Mexicans at the time faced a very basic decision: to stay in school and continue studying or to drop out and look for a job (among the many being created in the export-oriented manufacturing sector), most of which did not require more than a high school education.  Atkin found that, on average, for every 25 new jobs created in the manufacturing sector, one student would drop out after 9th grade.  (The World Development Report 2008 on Agriculture for Development had raised the question about “missing” individuals in this age group, but in relation to migration.)

  • While trade brought positive effects including a higher demand for low skilled workers and an eventual increase in their wages – consistent with David Ricardo’s basic notion – Atkin concluded that in Mexico it had the socially undesirable effect of preventing, or slowing down, the accumulation of human capital. The reduction in human capital investment is a trade-off which can have negative effects on the economy as a whole.
  • Factors other than free trade might explain this effect. First, young students may drop out if the returns to schooling are not high enough to compensate for the additional investment.  Second, a lack of access to credit and insurance for relatively poorer households might make it impossible for aspiring students to finance their investment and obtain higher returns by continuing to tertiary education or to cope with shocks and avoid abandoning school.  Finally, the result could be driven by a lack of availability of information about actual returns to investment in education, which could lead to myopic decision-making.

The movement of capital toward locations with lower labor costs is an expected, and intended, result of an agreement such as NAFTA, pursuing higher export competitiveness at the regional level.  David Ricardo would have said that TVs and automobiles shall be made in Mexico, while software shall be made in Silicon Valley.  What completes the story, however, is that because of distortions like the ones mentioned above – low educational quality, under-developed credit markets, or weak information that skews decision-making – free trade might lead to socially undesirable consequences.  And it did in the case of Mexico, as Atkin convincingly shows in his paper.  It seems that when Ricardo gets to the tropics, the world gets more complex.

November 7, 2016

* Raymundo Miguel Campos Vázquez teaches at the Centro de Estudios Económicos at el Colegio de México, and is currently conducting research at the University of California, Berkeley.  Luis-Felipe López-Calva is Lead Economist and Co-Director of the World Development Report 2017 on Governance and the Law.  Nora Lustig is Professor of Latin American Economics at Tulane University.

Pension Reform: Uneven Progress

By Christina Ewig*

Two Women

Nathan Gibbs / Flickr / Creative Commons

Recent pension reforms in Latin America show promise for greater gender equity across the region, but progress remains uneven in coverage and generosity.  Since 2007, 13 countries have either introduced or expanded some form of non-contributory pension, offered to defined groups as a social right, while others have made reforms to their existing pension systems that specifically compensate for gender inequalities.  These reforms in several instances were conceived with the participation of gender equity advocates.

  • The introduction of non-contributory pensions has equalized pension coverage between women and men in the region, according to a comprehensive study by the Organización Iberoamericana de Seguridad Social.
  • The equalization of men’s and women’s retirement age in the Dominican Republic, Mexico, and Uruguay makes it easier for women to attain the minimum number of working years for eligibility for a minimum pension.
  • The use of gender-neutral mortality tables in Bolivia and a return to the state-run defined-benefit system that treats men and women equally in Argentina, are also improvements.
  • More innovatively, in the 2007 expansion of the non-contributory pension in Bolivia and the 2008 reforms of the traditional pension systems in Chile and Uruguay, women were given credit toward their pensions for children born or adopted, to compensate for time out of the labor market.

The need for such reforms is great globally and in Latin America.  Women face much greater risks than men of poverty in old age due to workplace discrimination and gender imbalances in family carework responsibilities – the “motherhood wage gap” – during their working years.  Women are employed in smaller numbers than men in the formal economy, and they are often concentrated in the lower-paid and less-stable informal sector.  Domestic workers, primarily women, are in a sector notorious for employers’ evasion of pension payments.  Women in Latin America are also more likely than men to be found among the ranks of the unemployed or partially employed.  When employed full time in the formal sector, they face a diminishing but still substantial wage gap, earning 17 percent less on average than similarly educated men, according to the Inter-American Development Bank.  While the original pay-as-you-go pension systems were based on a male-breadwinner model that envisioned women as “dependents,” the 1990s push toward pensions that relied entirely on individual earnings magnified the effects of these discriminatory employment contexts and carework imbalances.  Moreover, in the individual capital account model, practices such as the use of differential mortality tables to determine monthly payments further reduced women’s income in old age, due to their greater expected longevity.

Despite the progress toward greater gender equity in pension policy, the issue deserves wider attention because advances have been uneven.  For example, while most countries in the region have adopted some form of non-contributory pensions, the percentage of the population eligible for these varies dramatically – as does the monthly payment.  Moreover, while the gap in pension coverage between men and women has narrowed, the compensation levels remain dramatically unequal.  Reforms, like those of Bolivia, Uruguay and Chile, that build-in compensation for market and carework inequalities deserve wider replication. 

February 26, 2015

*Dr. Ewig is Associate Professor of Gender and Women’s Studies and Political Science at the University of Wisconsin-Madison.  She is the author of Second-Wave Neoliberalism: Gender, Race and Health Sector Reform in Peru.

Cuba: Can Official Labor Meet the Needs of Private Workers?

By Geoff Thale*

Alberto Yoan Arego Pulido / Flickr / CC BY-NC 2.0

Alberto Yoan Arego Pulido / Flickr / CC BY-NC 2.0

As Cuba embraces a new but still undefined economic model, it’s unclear whether or how the country’s old labor laws and regulatory systems will be adapted to accommodate the interests of employees in the growing private and cooperative sectors, or in the newly autonomous state enterprises.  The trade union structure cannot play the social role it played in the past with the emergence of businesses owned by both individuals and cooperatives, a growing role for foreign investment, and increasingly decentralized state enterprises.  During a recent trip to Cuba, our research team met with representatives and staff from a range of officially recognized trade unions.  We met with the national labor federation – the Central de Trabajadores de Cuba (CTC) – and with national and local officials from some member unions, including the national president of the health care workers’ union; local trade union officials in the hotel and restaurant workers union in the tourist sector in Old Havana; and local officials representing self-employed and small-business owners who have joined the union for retail and commercial workers.  A Labor Code approved by the National Assembly in December 2013 changed some aspects of the legal framework for labor relations.  It continued to privilege the CTC as the sole labor federation, while also taking some steps to recognize the new issues that confront workers in the emerging sectors of the economy.  It established a maximum number of hours of work (44) for private-sector employees, required the self-employed or small-business owners to pay into a social security fund and ensure social protections – health care, pensions, etc. – for employees.  And it guaranteed private-sector employees seven days paid vacation per year (though less than the one month given to state-sector workers).

Our interviews, however, turned up more questions than answers.  Newly autonomous state enterprises have greater latitude in setting wages, incentives and working conditions, but it remains unclear how these decentralized enterprises will handle labor relations issues, and what kind of negotiations might take place on compliance with regulations on workplace safety and protection, wage requirements and employment opportunities.  Indeed, it is unclear how the current worker organizations will represent workers in these decentralized enterprises.  The growth of the private sector presents another challenge.  The CTC has sought to organize the self-employed into the unions in the industries in which they are functioning – the food service and restaurant union, the retail and commercial sector union, and so on – but it is unclear how the union will represent the interests of both owners of independent small businesses – cuentapropistas – and the 15 percent of “self-employed” who are actually employees in those enterprises.  Similar queries are popping up in the cooperative sector and in enterprises run as joint ventures with foreign corporations or as wholly foreign-owned companies.

Cuba’s new labor policies are clearly a work in progress, but they signal recognition that there is an emerging stratum of non-state sector employees – and that they need social protections.  It also reflects a balancing act between ensuring stable employment and benefiting from the flexibility that private sector employment models provide.  The new Labor Code requires, for example, that employers sign year-long contracts with employees while guaranteeing them access to health care, parental leave and other benefits during that period.  New challenges will emerge, especially in terms of the structures that represent the interests of these groups and advocate for them.  But for now, there appears to be progress in establishing a system of social protections for the self-employed and for their employees under the new labor code.  Concerns about the burden of compliance appear likely to be muted for at least the near term because, as it was clear to us during our visit, the self-employed and their employees are earning substantially higher incomes than are workers in the state sector.

*Geoff Thale, program director at the Washington Office on Latin America (WOLA), in October led the research team’s fifth visit to Cuba examining the impact of economic change on workers.

December 9, 2014

Mexico: Missing Demographic Opportunity

By Yazmín A. García Trejo

Javier Armas / Flickr / CC BY-NC 2.0

Javier Armas / Flickr / CC BY-NC 2.0

Mexico appears to be squandering a historic opportunity to take advantage of the “demographic bonus” represented by its surge in working-age citizens.  The Mexican government estimates that about 32 percent of the Mexican population today is between the ages of 12 and 29 years.  During this demographic bonus, a disproportionate percentage of the population enters the workforce—compared to those who are retired or nearing retirement—and drives economic growth.  Workers passing through this demographic window of opportunity are supposed to generate wealth that will help support a soon-to-be-aging population.  These opportunities don’t come around twice: age profiles in developing countries change quickly, and societies need to make the most of those few years during which the economically active population far surpasses that of the economically dependent.  The portrayal of Mexico as a young country in the media and the adoption of labor reforms in 2012 brought an initial optimism about its ability to take advantage of this bonus, but the current state of affairs casts a shadow over the potential of its young population.  According to a new report from the Organization for Economic Cooperation and Development (OECD), Education at a Glance 2014 Report, 22 percent of people between 15 and 29 years old in Mexico are neither employed nor in education or training.  These “ni-ni’s” represent a demographic bust because of a lack of jobs.

The lack of employment also influences young Mexicans’ attitudes toward education.  According to the OECD, even high educational attainment is not a guarantee of employment in Mexico.  A 2012 report by the McKinsey Center for Government found that only half of educated young people in Mexico believe that their post-secondary education has improved their job prospects.  According to a National Survey of High School Dropouts in 2012, moreover, many young men leave high school to contribute to their households’ finances, and young women quit to take on family responsibilities related to marriage and pregnancy.  Once out of school, they have no option but to participate in low productivity niches of the informal economy—severely reducing the benefits that their entry into the labor market could bring to the national economy.

The fate of young people has profound implications for Mexico’s economic future.  Without a comprehensive plan to expand employment opportunities and access to higher education that enables youth to flourish and lead Mexico into a new stage of development, Mexico will find itself a generation from now with the demographic profile of a developed country—with an aging population producing less but needing more care—but with a middle-income level of wealth.  Budgets will be stretched, and social tensions could be great.  Many of the most capable young people will leave the country for better opportunities.  Young Mexicans appreciate what’s at stake and are using the tools at their disposal to make their voices heard. Lately, student movements have attracted international attention using social media, but it’s far from clear whether the Mexican government and political, economic, and social elites are listening and have the vision necessary to avoid a crisis.

November 4, 2014

The “Informal City” and Latin America’s Urban Future

By Robert Albro

Embed from Getty Images

Latin American cities are powerful engines for growth, but sustaining that progress will require moving workers from the informal into the formal sector.  Latin America is the most urbanized continent in the world, and its cities are now the region’s main economic engine.  Its ten largest cities account for about half of the region’s economic output, and their share of economic activity is projected to increase by 2025.  They are also increasingly aspiring to insertion in the global economy. And mayors often assume a CEO-like autonomy in attracting international capital, business, and talent to their cities, while pursuing policies designed to enhance their municipal standing as critical global nodes, hubs or platforms of innovation, manufacturing and services.  Strategies include international city-to-city cooperation, corporate and multinational partnerships to fund infrastructure, global policy forums for mayors to share best practices regarding sustainability or climate change, and new urban planning intended to increase connectedness to global information flows.  Citi and the Wall Street Journal in 2013 judged Medellín, Colombia, the “most innovative city” in the world.  San José, Costa Rica, has become a telemarketing outsourcing center, in large part because of its well-prepared workforce.  And cities like Monterrey, Mexico, and Curitiba, Brazil, are emerging tech hubs.

Over the last several decades, however, rapid urban growth in Latin America has also greatly expanded the urban informal sector.  With sub-Saharan Africa, Latin America has the largest informal sector in the world.  Of all workers in greater Bogotá, for example, 59 percent operate in the informal economy.  Low levels of technology, finance and job skills conspire to limit productivity and to distance Latin America from the frontiers of the global economy.  Along with low earnings and the lack of social benefits or income security, a large informal labor sector generates inadequate tax revenue for municipalities and chronic underinvestment and neglect of urban infrastructure.  Pervasive informality also contributes to social exclusion.  More than 80 percent of the top 50 most violent cities in the world are in Latin America, and this violence is concentrated along rapidly expanding urban margins.  In the absence of resources from municipal authorities, marginal urban dwellers turn to illicit actors and activities for unregulated or pirated services and protection.  Potentially competitive enterprises are hesitant to establish a presence in cities where property ownership is contested or where government voids leave land, money, governance and other resources, vulnerable to criminal capture.

Latin America’s cities aspire to effective insertion into the global economy while also struggling with very local and hard-to-change challenges of informality and unregulated urban growth.  Labor flexibilization and privatization, hallmarks of 1990s-era neoliberal policies, at once promote the growth of the informal economy and complicate urban planning intended to facilitate the development of assets necessary for global competitiveness.  Urban planners mistakenly continue to treat participants in the informal economy as a transient reserve army of labor composed of rural in-migrants not yet absorbed into the industrial sector.  Yet if cities want to develop their niche in the global economy, policy makers will also have to attend to the connections between urban informality and social exclusion. Large-scale and violent protests, such as last year’s flash mob protests in shopping malls by working-class Brazilian youth, are demanding their “right to the city.” The economic future and competitiveness of Latin America’s cities significantly depends upon their capacity to address the second-class citizenship of their informal workforce. Overcoming social exclusion is a first step to competing effectively in a global economy characterized by increasingly stiff competition among cities.