Thursday, April 15

Economic crisis: One out of every three countries in Latin America and the Caribbean is in a situation of “financial vulnerability”, according to the UN | Economy

Three people protect themselves from the virus with masks, last July in Quito (Ecuador).
Three people protect themselves from the virus with masks, last July in Quito (Ecuador).Dolores Ochoa / AP

The financial hecatomb that was glimpsed just a year ago, at the dawn of the coronavirus crisis, has not been such. But the economic risks facing low- and middle-income countries, many of them in Latin America and the Caribbean, remain highest. The United Nations Development Program (UNDP) has warned this Thursday that one out of every three nations in the region is in a situation of “financial vulnerability”, according to an indicator constructed based on debt levels and liquidity criteria and solvency. The rest of the names included under this heading are, for the most part, African.

Of the 40 countries that make up Latin America and the Caribbean, 14 are vulnerable according to detailed analysis by technicians from the world’s largest development agency. And five of them are included in the category of greatest risk, the one in which public finances are in a situation of “severe vulnerability”: Venezuela, Argentina, Ecuador, Belize and Granada. The first of them is immersed in a long-standing economic, social and political crisis with devastating consequences for its population; and Argentina, Ecuador and Belize became in 2020 three of the only five countries in the world to default on their debt. The rest —Bolivia, Costa Rica, El Salvador, Honduras, Nicaragua, Saint Vincent and the Grenadines, Dominica and Haiti— fall into the group of countries with “highly speculative” debt.

The problem is twofold: it is not just that their public finances are compromised to levels unimaginable in the eyes of the rich world. It is that, paradoxically, middle-income countries – most of those in the category of “severe vulnerability” – are not covered by the debt relief mechanisms put in place in recent months. They focus their efforts on the poorest, who can take advantage of these measures, such as the debt moratorium deployed by the G20 or the timid aid efforts of the International Monetary Fund (IMF). This disparity leaves many nations in limbo: their financial needs are pressing, even more so in the midst of the pandemic, but they hardly get help to get out of the trance and be able to guarantee a better future for their population.

In the case of Latin America and the Caribbean, there are five countries that can benefit from these relief schemes designed by the international community, all of them Central American or Caribbean – Nicaragua, Saint Vincent and the Grenadines, Honduras, Dominica and Haiti. while the remaining nine, including the largest in the group, do not have access to the mechanisms put in place by the international community to alleviate their situation —Argentina, Venezuela, Ecuador, Bolivia, Costa Rica, El Salvador, Jamaica, Belize and Granada.

“The initiatives implemented so far [para socorrer a los países en problemas], are important. But, given the size of the challenge, they are not enough: more is needed, more ambition is needed. These are measures that must be taken urgently and collectively ”, stressed the UNDP administrator, Achim Steiner, in a meeting with the media. “Risk is not so much a cascade of defaults, that also, but that the lack of fiscal space in these countries prevent a recovery in these countries after the crisis ”. In his opinion, the decoupling between advanced and developing economies is, at this point, something more than a risk: the former “are on the way to a V-shaped recovery” while the others are immersed in “a historical setback on their levels of development ”.

According to calculations by the New York-based body, the debt service of countries in trouble will total 1.1 trillion dollars this year, a figure that would be enough to vaccinate up to 2 billion people in the emerging world within the framework of the Covax initiative.

“More than to the countries, our call is to the multilateral system”, underlines in conversation with EL PAÍS the chief economist of UNDP, George Gray, “that several developing countries are immersed in a slow-burning debt crisis.” In the specific case of Latin America, Gray sees two very different groups: that of nations highly dependent on the sale of raw materials, mostly in South America; and that of those suffering from “structural problems, starting with some in the Caribbean that have a high level of indebtedness, that depend on tourism and that have to import oil and food.” “The covid crisis is added to a slow process of accumulation of liabilities that is hampering the region’s agenda,” he says. “A financially vulnerable country is one in which debt strangles the possibility of achieving development,” he concludes.

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