From Mexico to Chile, Latin Americans hope that with the arrival of the coronavirus vaccine, the income and work they lost during the pandemic will return. The recovery will begin in 2021, according to multilateral organizations, but it will be uphill and will not happen completely. This will depend on how efficient the State is in distributing and administering the vaccine, if it has the capacity to maintain fiscal stimuli to help its populations, and how governments handle possible social disagreements.
At the end of the year, the data portray a stark and difficult economic reality. According to Economic Commission for Latin America and the Caribbean (ECLAC), the economy will contract 7.7% in 2020 and grow 3.7% in 2021. The improvement will be nothing more than a “statistical rebound”, points out the multilateral, and will not be enough to recover the levels of economic activity prior to the pandemic of the coronavirus. The International Labor Organization (ILO), in its report released Thursday, projects that 30 million people are unemployed and 23 million will have left the workforce this year. “In 2021 employment will be in intensive care and the indicators could worsen,” says the annual report. For his part, Inter-American Development Bank (IDB) He said that the value of exports of goods will contract between 13% and 11% this year, limiting the income that enters the countries.
In a presentation, as part of his latest Preliminary Overview of the Economies of Latin America and the Caribbean 2020, ECLAC pointed to four factors that will define the economic recovery: the intensity and spread of the second wave of infections, the agility to produce and distribute vaccines, the capacity of each country to continue with monetary and fiscal stimuli, and geopolitical tensions o that may arise.
“Although the important fiscal and monetary efforts made by the countries have mitigated the effects of the crisis, the economic and social consequences of the pandemic have been exacerbated by the structural problems that the region has historically dragged,” the organization said in a statement. . “For the year 2021, a positive growth rate of the gross domestic product (GDP) is expected, which basically reflects a statistical rebound, but the recovery of the pre-crisis level of GDP will be slow and would only be reached by the year 2024.”
Before the pandemic, Latin America already showed low economic growth. ECLAC indicates that between 2014 and 2019, growth was, on average, 0.3%. In 2019, specifically, it was 0.1%. According to its projections, South America will contract 7.3% this year and grow 3.7% in 2021; Central America will fall 6.5% in 2020 and will expand 3.8% next year; Finally, the Caribbean will be the region with the greatest contraction in 2020, of 7.9% and will see a growth of 4.2% in 2021. In the Caribbean, the most affected country will be Saint Lucia. The island’s economic contraction is expected to be 26.6%.
Outside the Caribbean, the most affected countries in Latin America will be Venezuela with an estimated 30% drop; followed by Peru, with a contraction of 12.9% and Panama, with a 11%. Argentina and Mexico will see their economies fall 10.5% and 9%, respectively.
The IDB, for its part, published an annual balance of exports in the region in which they assure that, despite the fact that the trend in trade performance shows signs of improvement, the uncertainty caused does not allow us to see a recovery. The region had a 20.2% drop in exports – the biggest drop in the world, the report said. Imports are estimated to have fallen similarly, by 19%.
“While the region has not recovered its pre-pandemic export levels, the impact of the crisis is fading and the outlook has improved,” said Paolo Giordano, chief economist for the Bank’s Trade and Integration Sector, in the statement. report coordinator. “However, instability persists and a change in trend towards a sustained growth trajectory is not yet in sight,” he added.
The magnitude of this economic crisis due to the pandemic makes it different from any other, the regional director for Latin America and the Caribbean of the ILO, Vinicius Pinheiro, said at a press conference on Thursday. “It is a crisis that reaches all economic sectors and we are also talking about unemployment and unemployment levels unprecedented in history.”
“People lose their jobs and no longer go back to work. One of the most important impacts is on the permanent unemployment rate, ”said Pinheiro. For the employed, “what has happened was a reduction in wages or the amount of hours worked, that is, it is a crisis that also affects those who kept their jobs.” Women and youth have been the most impacted by job loss and child labor has increased, he added.
The countries that implemented fiscal stimuli this year made “formidable” efforts, Pinheiro pointed out, “but for next year it is essential to change the chip and look at a long-term sustainable economic recovery. Not only to heal the scars left by the crisis, but also to explore opportunities and, more importantly, to address structural elements ”.
Digsmak is a news publisher with over 12 years of reporting experiance; and have published in many industry leading publications and news sites.