Labour shortages threaten Uruguay's prosperity

3D projection of the pulp plant
Image caption The $1.9bn pulp mill represents the largest investment into Uruguay yet

Erwin Kaufmann is in a tight spot.

The company he leads has just announced a $1.9bn (£1.18bn) investment in Uruguay, said to be the largest yet in this small South American country of 3.4 million people.

Now he needs to find the thousands of workers to build a pulp mill for him.

And that, he has discovered, is not an easy task in this booming economy.

Mr Kaufmann is the chief executive of Montes del Plata, a joint venture between Swedish/Finnish Stora Enso, one of the world's largest forest product companies, and its Chilean partner Arauco.

He says the company is facing two major challenges.

"Firstly, the country is enjoying a fairly good economic situation, and there is full employment in some sectors, like construction," he says.

Five years ago, some 25,000 workers were employed in construction, he says. Now, there are 50,000. There simply are not enough of them to meet the needs of the industry.

The second challenge, Mr Kaufmann continues, is that, "we need workers with specific skills, like welders of some special pieces, and those are difficult to find even in larger countries".

Foreign workers

Image caption A shortage of workers is holding back construction and economic growth in Uruguay

The Montes del Plata pulp mill, to be situated in Colonia, across the river from Buenos Aires, Argentina, will have an annual capacity of 1.3 million tonnes. This makes it the largest in the world by output.

Construction will start next May and will require between 3,200 and 6,000 workers. The mill is expected to be operational in 2013.

To achieve this, some of the workers must come from abroad, Mr Kaufmann says.

"We will try to recruit every local worker available, we will train people jointly with the government," he says.

"But if that is not enough, we will need to bring people in from other countries."

The negative side of growth

Uruguay is a country that until recently used to be burdened by widespread unemployment.

As recently as in 2002, one in five were unemployed here, according to official statistics.

"But sustained economic growth over the last few years [along with] an increase in foreign investment in agriculture and forestry has created many new jobs," observes Federico Muttoni, manager of human resources consultancy Advice.

The unemployment rate has fallen to 6.1% following years of rapid economic growth. Over the last seven years, the economy here has expanded almost 6.5% per year. Last year, growth was even stronger at almost 9%.

"So now it is hard to satisfy the demand for adequately skilled workers," Mr Muttoni says.

Inflation risk

Image caption President Jose Mujica is struggling to find ways to ensure companies have enough workers

Personel managers agree that there is a shortage of workers, mainly in technical areas such as engineering and information technology, in a country where the most popular careers are medicine, law and psychology.

And the situation will get worse soon, according to Juan Manuel Rodriguez, director of Uruguay's National Institute of Employment, largely as a result of another large investment project.

A $2bn mining project by the UK company Zamin Resources is expected to employ 1,100 people direcly, along with the creation of between 3,000 and 10,000 indirect jobs.

Construction of the mining project would begin only after the pulp mill is finished, in 2013. The delay has been encouraged by the government in an attempt to prevent a fight over human resources.

Although the reduction in the structural unemployment rate is seen as a major success for the country, some economists warn of the negative effects of having few recruits available.

"Salaries will grow in the rush for workers and that can put pressure on inflation," says economist Alfonso Capurro, from CPA Ferrere, a local consultancy.

"Some companies could lose competitiveness."

What can be done?

The government is encouraging Uruguayans abroad to return home, in a joint move with its Spanish counterpart.

Uruguayans who migrated to Spain in the last decade are getting incentives to leave the European country, which is suffering a severe recession, and come back.

Many are pondering other solutions.

The Construction Chamber has suggested that the Ministry of Defence train army staff as builders.

Training and reconversion of workers in some non-productive sectors could be another solution, says Mr Rodriguez.

Informal jobs are still popular with some unskilled people, including panhandling squeegees and on-street parking attendants.

The problem is, those kinds of activities are attractive for many.

"I would not change this job for working, say, in a factory," says Julio Mendoza, who takes care of cars parked on a central street in Montevideo, Uruguay's capital, in exchange for some coins.

"Money is not that good, but it's enough, and I work when I want, I'm my own boss.

"Although as wages go up, there could be an incentive."

Focus on Education

The Institute of Employment is now providing training for those most affected by unemployment, namely women and young people.

"Young people tend to change jobs often because they don't have the basic skills to keep them," Mr Rodriguez says.

"We are now teaching them some common sense basic skills, such as the importance of teamwork, how to follow orders and comply with the rules."

Everyone agrees on the need to raise the quality of the national education system, something which has been discussed for years.

President Jose Mujica has promised to do it during his term in office, which started almost one year ago.

That will take time.

In the meantime, Mr Muttoni, the human reserources consultant, says that more students should consider going into short technical, technological and industrial careers.

"Many people think that being a doctor is better than being a skilled electrician, but electricians find jobs quicker than doctors," he says.

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