That was the diagnosis offered by a group of Latin American and Caribbean labor leaders who attended a two-day round of talks with representatives from the IDB, the Organization of American States and the International Labor Organization in July at the Bank’s headquarters in Washington, D.C.

It was the fourth such high-level meeting since 1992 with leaders of the Inter-American Regional Workers Organization (ORIT, after its name in Spanish). Participating were delegates from the ICFTU Caribbean trade union federation as well as officials from Canadian and United States labor groups.

The goal of these meetings is to broaden and deepen the dialogue between the Washington-based international institutions and a key sector of the region’s civil societies. In previous rounds discussion topics included the social impact of market-oriented economic reforms, the role of social dialogue and consensus-building in forging public policies, and labor’s participation in the region’s economic integration.

At the July meeting, labor leaders voiced concern over the toll that globalization has been taking in terms of unemployment and recession in developing nations in the wake of the crises caused last year by the Asian financial meltdown and the Russian debt moratorium. The visitors heard presentations by OAS Secretary General César Gaviria and ilo Regional Director Víctor Tokman and met with senior IDB managers and members of its Board of Executive Directors.

Many of the trade unionists saw worrisome signs of social upheaval brewing in their countries. Federico Ramírez, president of the Venezuelan Workers Confederation, said that country was going through its worst economic slump in a century amid a perilously strained political climate. “What’s really dangerous is that social dialogue has been sidetracked,” he told the conference.

Kjeld Jakobsen, secretary for international relations at Brazil’s trade union congress, voiced concern about the effects of speculative capital coursing in and out of frail developing economies. He urged international financial institutions to look into this issue in light of the case of Malaysia, which last year opted for stringent exchange restrictions in a bid to defend its currency from speculative attacks.

Gilbert Brown, secretary general of Costa Rica’s Rerum Novarum Workers Confederation, complained that unemployment had rocketed this decade after Latin American countries tore down their trade barriers, pared their state sectors and opened up their economies to foreign investment. “We’ve wound up with shrunken states serving the interests of multinational companies,” he said.

In his opening remarks, IDB President Enrique V. Iglesias acknowledged that the adverse consequences of globalization were generating strong discontent in Latin America and the Caribbean. However, he added, the region must address its problems head-on, and the best way to go about identifying what needs to be done is social dialogue.

While he acknowledged that 1999 was bound to be a bad year for emerging economies due to the repercussions of the turmoil in international financial markets, Iglesias underscored the importance of taking swift action to counteract the effects of economic upheaval. “Like any infectious disease, contagion strikes those with the weakest defenses,” he cautioned.

Keep the reforms. The slowdown in most of the countries in the region is hurting not only financial markets but also output, employment and social programs. Nevertheless, rather than think about rolling back the market-oriented reforms aimed at making economies more competitive in the face of increasing globalization, Latin American and Caribbean countries should strive to make their social policies more efficient and ensure that they benefit the most needy, the IDB president said. The IDB itself last year devoted nearly 40 percent of its lending to social programs, and designed a new line of emergency loans to help countries cushion the effects of financial contagion.

As part of the dialogue with the labor leaders, some of the Bank’s leading specialists offered the visitors updates on the region’s economic outlook, the multiple causes for its high unemployment rates and the status of its various integration processes. They were also briefed on the Bank’s programs to modernize labor markets, improve job training, and other initiatives designed to help workers cope with a fast-changing economic scenario.

The presentations led to discussions in which participants did not always see eye to eye. Nevertheless, in his concluding remarks, ORIT Secretary General Luis Anderson said the meetings had been extremely productive. The labor leaders called for the establishment of a working group that would include representatives from labor and other international institutions that would consider ways in which trade unions can participate in Bank-financed projects.