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INFORMALITY: A PROBLEM IN EMERGING MARKETS

Coursera: Final Project

Executive Summary:

A research has been conducted by a constituent body as requested from the Ministry of Labor and Promotion of Employment in Peru. This paperwork aims to explain the importance of formality in emerging countries, to describe how informality is directly linked to poverty and poor economic growth. Empirical evidence and a real life example is given. Through the artisanal fishery in Peru, this paperwork aims to portrait how the informal fishery impacts the Peruvian economy and its natural resources. At the end, feasible solutions are suggested that the government could approach to eradicate informality, according to the Peruvian current situation.

Introduction:

There are many economic sectors and activity that are promising for the countrys economic growth. However, there is a lot of informality from the habitants. The eager to earn more money makes habitants resilient to pay takes or be compliant with regulations. Informality is a big issue in emerging countries as they play an important role in the labor market sector. This is a big problem because it does not give a clear view of the countrys economic growth. The relationship between poverty and informality it is clearly linked and it can be seen in emerging countries. As it can be seen from the graphic where it states that in Peru the problem that mostly affects the Peruvian SMEs is informality.

To understand the problem that Peru faces regarding to its informality approach, we will take an example:

Artisanal Fishery as an economic activity.

Artisanal Fishery is an economic activity that has been seen as one of the most potential sources of development for Peru. This entrepreneurial economic activity is being developed in ten regions of the Peruvian coast. There is a high increase in this activity, many towns have started to set up an artisanal fishery craft as a way of enhancing their way of life.Facts: According to the last Artisanal Fishery Census, there are 12 thousand crafts in the coast of Peru, Tumbes, Piura, Lambayeque, La Libertad and Ancash where approximately 50% of them are artisanal fishers. Furthermore, in the last 17 years this activity has increase in 35% in those cities mentioned above. However, according to the Peruvian Ministry of Production, 70 % of its activities area are considered informal.

Effects: The Artisanal Fishery informality causes disorder and damage to a countrys natural resources. It increases the volume of indiscriminate extraction of aquatic resources. Fishers do not recognize the importance of incubation dates and when it is best to wait and not interfere with the fish reproduction cycle. Safety regulationsFishers do not consider some aspects that are important for their wellbeing and the success of their business. In other words, they do not consider essential to follow some protocols that are only seen expenses. Unfortunately, when an accident happens it could be devastating as it can incur in financial and human lost. Unclear economic view:Due to informality, the government cannot access easily to objective data and numbers, that could help to have a clear view of the economic activity, its benefits, obstacles and how to improve it.

Solutions: Government should be seeking to reduce informality and develop this economic activity. Inclusiveness

An effective solution could be the creation of programs that allow fishers to formalize their activities and informs fishers the impact that this could cause on the environment when they fish in the wrong seasons. Another program should aim to give information and motivational courses so fishers with few economic resources can be entrepreneurs, formal and active in the Peruvian economy. Public policies and FormalizationThere should be more regulations and the creation of a strict protocol to follow during fishing periods. Assist fishers to formalize their activities and register their fishing craft. Trade Unions & SyndicatesSyndicates can help their members to negotiate in a collective approach the salaries, benefits and solve obstacles in a more effective way. It could be beneficial to create incentives and awards between the members to motive and align their activities more formally.