Immigrants Lift Chile’s Labor Market While Wages Kept Low

Photographer: Morten Andersen/Bloomberg

Chile's economy is turning down, expanding at the slowest pace in four year in the first quarter, and unemployment has started to rise. Close

Chile's economy is turning down, expanding at the slowest pace in four year in the... Read More

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Photographer: Morten Andersen/Bloomberg

Chile's economy is turning down, expanding at the slowest pace in four year in the first quarter, and unemployment has started to rise.

Haitian immigrant Jameson Lazarre says he sometimes works shifts as long as 24 hours at the warehouse of a plastics factory because his temporary visa in Chile depends on keeping an employment contract.

“I spent so much time looking for a job in Haiti after the 2010 earthquake, that I am willing to do whatever here as long as I remain employed,” Lazarre said while standing in Santiago’s central square.

Lazarre was one of a record 158,128 foreigners who obtained temporary or permanent residency in this country of 17 million last year, according to the Immigration Department. The influx helped Latin America’s wealthiest nation create almost 1 million jobs in the four years through March, while keeping a lid on wages. The new arrivals accounted for about three quarters of the increase in Chile’s workforce in 2013, when the jobless rate fell as low as 5.7 percent.

Now the economy is expanding at the slowest pace in four years and unemployment has started to rise. With more people likely to continue arriving, wage increases should slow from 6.5 percent in May, easing pressure on inflation that fell to 4.3 percent in June.

Immigration has “contained wage growth, one of the most important costs of production, avoiding a rise in consumer prices,” said Hermann Gonzalez, an economist in the local unit of Spain´s Banco Bilbao Vizcaya Argentaria SA.

Photographer: Morten Andersen/Bloomberg

The El Teniente copper mine and processing plant, owned and operated by Corporacion Nacional del Cobre de Chile (Codelco), stands near Rancagua, Chile. An investment boom in the mining industry pushed unemployment to 5.7 percent in the second half of last year from 9.7 percent at the end of the 2009. Close

The El Teniente copper mine and processing plant, owned and operated by Corporacion... Read More

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Photographer: Morten Andersen/Bloomberg

The El Teniente copper mine and processing plant, owned and operated by Corporacion Nacional del Cobre de Chile (Codelco), stands near Rancagua, Chile. An investment boom in the mining industry pushed unemployment to 5.7 percent in the second half of last year from 9.7 percent at the end of the 2009.

Unequal Conditions

Lazarre, 24, abandoned an agronomy course in Haiti after a year because he didn’t have the money to complete his studies. He chose to come to Chile last year after trawling the Internet to see which countries offered the best prospects. What he didn´t know is that he would get paid half as much as Chileans doing the same job and that he often would be paid late.

“Employers take advantage of foreigners because they know we depend on two years of uninterrupted work at a company in order to apply for permanent residency,” Lazarre said.

Chile’s main labor union federation, known as CUT for its initials in Spanish, welcomes the arrival of foreigners, as long as they don’t undercut local workers and don’t represent more than 15 percent of any one company’s workforce, as stipulated in the law.

“We are not against their arrival if they are given the exact same conditions and benefits as Chilean workers,” said Jose Figueroa, who represents farm laborers and indigenous peoples at CUT. “The problem is that some businessmen pay them much lower salaries than established in Chilean legislation and we won’t accept that.”

Photographer: Morten Andersen/Bloomberg

A worker builds a wall at a construction site in Santiago. Close

A worker builds a wall at a construction site in Santiago.

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Photographer: Morten Andersen/Bloomberg

A worker builds a wall at a construction site in Santiago.

Economic Boom

The flow of people into Chile helped the economy grow an average 5.1 percent in the four years through 2013 as an investment boom in the mining industry pushed unemployment down from 9.7 percent at the end of the 2009.

The boom fed a 24 percent jump in immigration last year, with Chile attracting workers from countries such as Peru and Colombia and to a lesser extent, Spain and Argentina. Of the arrivals, only 20,758 were 18 or younger.

About three quarters of new arrivals are Latin American and are linguistically, culturally and religiously similar to the Chileans. Peruvians accounted for 31 percent of last year’s immigrants.

Peruvian restaurants have opened up across Santiago, with Peruvian maids replacing many of their Chilean counterparts over the past decade. Haitians have become a common sight in a country where there was almost no black population 20 years ago.

Following Jobs

The influx accounted for much of the 183,240 increase in the labor force in 2013 as Chile’s birthrate declined and more young people chose to stay on in university or training.

“The vast majority of foreigners come here to work, especially in the construction and services sectors,” said Pedro Hernandez, immigration official at the Ministry of Foreign Relations.

While Chile has seen previous waves of immigrants, including Germans starting in the 1850s, Arab Christians during the collapse of the Ottoman Empire and Croatians before the 1920s, it has never experienced the same levels of immigration as Argentina or Brazil.

The Immigration Department estimates there are 441,000 foreigners living in Chile legally, accounting for about 2.7 percent of the population. That is the highest level since 1920 and compares with 1.22 percent in 2002.

Cristian Hernandez, 48, gets up at 5 a.m. every morning to peel potatoes, beetroot and carrots in the Santiago neighborhood of Cerro Navia. His hands are full of cuts from the work.

No Guess

The government doesn’t even hazard a guess at how many undocumented immigrants like Hernandez there are in Chile.

“I am obliged to put up with the conditions employers set,” said Hernandez, who was a bartender in the Dominican Republic before arriving in Chile about two years ago. “I am willing to do whatever in order to survive.”

Now, the economy is slowing, unemployment is rising and the flow of immigrants could turn into a problem, economist Gonzalez said. The jobless rate climbed to 6.5 percent in the three months through June from 6.2 percent in the same period a year earlier.

“As the creation of jobs stagnates and there is even a decline in positions, people are starting to get fired,” Gonzalez said. “The question is who will go.”

Construction, hotels, restaurants, mining and financial services all lost workers in the second quarter from a year earlier. Employment in the mining industry alone fell 8.5 percent to 236,020 workers.

BHP Billiton Ltd. (BHP) announced July 29 that it would reduce staff by 6 percent at its Pampa Norte copper mine in Chile because of declining ore grades and rising costs.

Slower Pace

As the mining boom petered out, GDP expanded 2.6 percent in the first quarter from a year earlier, the slowest pace in four years. Manufacturing (CHIPMFGY) has declined in eight of the past 12 months, and retail sales rose 2.3 percent in June, the second-slowest pace since 2009.

Still, immigration is not a concern, Economy Minister Luis Felipe Cespedes said in an interview on July 22. “It is a natural process in a nation that is growing and that is attracting people due to its economic dynamism.”

The flow of immigrants would slow as economic growth eases, he added.

Past experience doesn’t bear that out. When the economy contracted 1.5 percent in 2009, new arrivals rose to 100,069 from 84,249 the year before. Immigration then slid to 81,002 in 2010 before rebounding to 95,130 in 2011. There are no figures available on how many people are leaving the country.

Madsen Macelus -- who came from Haiti in 2010 and has worked on various construction sites since then -- has managed to bring over his wife, son and cousin as he applies for a permanent visa.

Pay Better

Many other immigrants plan to have family members and friends join them, even though they recognize finding jobs has become harder as the economy slows. The pay, they say, is still better in Chile.

Chile’s GDP (CLGDPNA%) per capita on a purchasing power parity basis is $19,888, compared with $11,730 in Colombia, $11,735 in Peru and $1,370 in Haiti, according to the International Monetary Fund.

“There is no work in Haiti, and Chile is an easy country to get into,” said Macelus, 39, who has no plans to return to his home nation.

For now, there is no serious blacklash against foreigners. While there was an anti-immigrant march in October in Antofagasta in northern Chile where many Colombians have settled, there have been no protests in Santiago where most foreigners live.

Still, there will be increasing competition for jobs as foreigners represent a larger share of workers entering the labor market and unemployment mounts.

“When I arrived only eight months ago it was easy getting a job, but now there are so many foreigners that it takes time,” said Lazarre. “There are loads of jobless immigrants.”

To contact the reporter on this story: Javiera Quiroga in Santiago at jquiroga5@bloomberg.net

To contact the editors responsible for this story: Philip Sanders at psanders@bloomberg.net; Andre Soliani at asoliani@bloomberg.net Gail DeGeorge

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