Economic Opportunities and Indigenous Peoples in GUATEMALA

1. Economic Opportunities and Indigenous Peoples in GUATEMALA Maria Victoria Fazio (World Bank) Georgetown University, February 9 th, 2007

2. Objectives To examine the economic opportunities available to indigenous in comparison to non indigenous Guatemalans in the rural and urban labor market. And to investigate the determinants of the patterns of employment of these groups with special emphasis on the role of social networks

3. Motivation • Indigenous Guatemalans have had historical restrictions in accessing crucial assets for human development such as land, labor, health and quality education • Recent studies identified clear disadvantages of indigenous in terms of poverty reduction and human capital accumulation. (Hall and Patrinos, 2006) • Among disadvantaged groups the social networks appear as an asset that can help to overcome the lack of opportunities. (e.g. by reproducing a successful strategy to generate income). • However, as sociologists (Granovetter, 1985) also emphasize, social interactions among disadvantaged groups may inhibit upward mobility (beyond their typical income generating activities).

4. Outline • Characterization of contextual framework • Employment patterns of indigenous and non indigenous • Job opportunities finding methods: How do indigenous and non-indigenous find employment? • The role of social networks • Concluding remarks and policy options Main data sources: Households survey: ENCOVI(2000), Labor Force survey: ENEI (2004) and Census (2002)

5. Remarks on the context for indigenous peoples Based on World Bank WDR(2000) and World Bank (2004) analytical frameworks

6. Guatemala: The Multilingual, Multicultural and Multiethnic nation* • 41% of population self-identified as indigenous: • 22 Mayan groups, and the Garifuna and Xinca • 70% of indigenous live in rural areas • Agriculture activities account for a quarter of the GDP in Guatemala. • The economy is still predominantly based on traditional exports of coffee and sugar, despite the increase in Non- traditional agricultural exports (NTAE). • High underemployment levels (16.5%, 2004) • Increasing amount of migrants to other countries (50,000 per year to the US, IOM,2005) *Accord on Identity and Rights of Indigenous Peoples, 1995

7. Employment Patterns Source: ENCOVI (2000)

8. Differential patterns of employment between indigenous and non indigenous: • Indigenous Guatemalans are typically employed: • in lower-paid, unpaid and informal jobs • as self-employed (especially more than non-indigenous in urban areas) • Agriculture (Subsistence in many cases) and handicrafts (traditional) • In contrast, non-indigenous tend to be employed: • in salaried jobs, • in larger firms and formal sector • and in the public sector

10. Although much of these differences can be explained by differences in backgrounds and in endowments of physical and human capital there is still evidence for discrimination between against indigenous Guatemalans. (See estimates with same data by Schapiro, 2006) => Given these employment patterns…How did indigenous and non indigenous Guatemalans find these employment opportunities?What is the role of social networks ?

11. How do Guatemalans find employment opportunities?

12. How do Guatemalans find employment opportunities? • The use of Social contacts (networking) is the most reported method: 37 % of workers report having found job through relatives or friends • The contacts with relatives (tradition) are more frequent among indigenous, while the contacts with friends are more frequent among non-indigenous: 35% of indigenous (20% relatives and 15% friends or politicians) 38% of non-indigenous (16% relatives and 22% friends or politicians) • The use of formal methods (submitting CVs and job competition) is more frequent among the non-indigenous: 15% of non-indigenous 8% of indigenous report formal methods

13. The reliance on social contacts facilitates the job seeking for individuals trying to differentiate from applicants with similar characteristics However, there are caveats identified in the literature: • Social contacts are more likely to facilitate the creation of low quality jobs • As Holzer (1987, 1988) argues, these informal methods may allow race to become important in hiring, and so detrimental to minorities • As Mazza (2005) points, the social contact channel can reinforce and reproduce the effect of the discriminatory practices in the labor market against certain groups (by transmitting the same occupation to the refereed job seeker)…

14. Different Job finding methods in rural and urban areasFormal methods and contacts from friends are more typical in urban areas

15. Conditional on workers’ characteristics (education, gender, age, etc) and on the characteristics of the jobs… • What are the propensities of indigenous vs. non-indigenous to find a job with social contacts/formal methods? • Models at national, rural and urban levels and for specific occupations and education groups • Of the Probability of finding a job with: • Social contacts, relatives, friends and formal methods

16. The likelihood of finding a job with social contacts varies across ethnic groups and areas • Indigenous peoples are almost 7% more likely to find jobs using social contacts than the non-indigenous. • In rural areas, the probability increases to 14% • While in urban areas, the non indigenous have almost 4% higher chances of getting a job with social contacts

17. Indigenous peoples have higher probabilities of finding jobs through Relatives in all areas, and friends only in rural areas • While non indigenous have higher chances of finding a job through friends in urban areas • In urban areas the indigenous are more likely to find a job using formal method=>therefore, there is room for labor intermediation services

18. Within specific occupations and levels of education

19. Remarks • Social contacts are more associated with higher chances to work in informal and low-skill occupations and in rural areas among indigenous peoples • Whereas among the non-indigenous, social contacts are more effective in high skill occupations and in urban areas • In urban areas, it is more likely for indigenous people to find a job with formal methods rather than social contacts • Therefore, there is room for intermediation services to increase opportunities for indigenous peoples in urban areas, where their networks do not seem to facilitate these jobs.

20. Using data of the census 2002 and an empirical measure of social networks we also find evidence of social networks effects among indigenous groups in: • the likelihood of engaging in off-farm activities like handicrafts, but no evidence of networks facilitating employment in non-traditional sectors. • Also, social networks tend to encourage self-employment • Access to public services can be relevant in providing complementarities with social networks for developing strategies to increase opportunities. • For instance, the access to services like electricity was found as a factor that reinforces the role of social networks on the decision to move to off-farm activities (i.e. handicrafts) among indigenous peoples.

21. Examples of social capital among indigenous peoples within traditional sectors Organizations fostering access to markets: • CONIC(National Indigenous and Campesino Coordinating Committee) Provides access to infrastructure, training, market info to promote family enterprises based on food security and diversified agriculture • MANOS CAMPESINOS:Formed in 1997 in Quetzaltenango joining 7 coffee cooperatives and over 1000 farmers • Provides Technical support for product diversification, conversion to organic production, improving administration • Promotes participation of rural and indigenous women • Fair trade agreements with international coffee purchasers like Starbucks => POSITIVE EFFECTS: increases in income, school attendance and health care

22. MAYAN HANDS (Since 1989): • Aimed at providing female indigenous artisans (400) with quality raw materials • and assistance in marketing for international trade • POSITIVE EFFECTS: improvements in nutrition, school attendance, housing and savings • MAYAN TRADITIONS Working for 10 years in theHighlands • Finds markets for indigenous women’s handmade crafts • Scholarship programs The increase of these cases of social interactions can foster more human capital accumulation and in turn more diversification of activities for indigenous peoples

23. Policy options • The role of social interactions should be strengthened in different ways. Providing information of Models of successful cases (i.e. NTAE). Technical capacity building on: agency (association and representation) of organizations, marketing, new products, etc. - This implementation may have large positive multiplier effects through the social networks • Increasing access to basic services and assets (land, credit, education) is crucial in providing complementarities to indigenous communities (Public investment can also generate more jobs) • Public intermediation services can increase the number and quality of the labor market opportunities available to indigenous peoples in urban areas. • Expand the coverage of bilingual education for the indigenous peoples • Increase qualitative and quantitative data collecting on the living conditions and economic activities of indigenous peoples. There is not enough systematized data on the problems faced by these communities.

24. Policy design should be culturally appropriate for indigenous peoples. • And should be enhanced with the inclusion of indigenous peoples as part of the global strategy for the country. Thank you!