The coronavirus pandemic in 2020 destroyed much of what Latin America had achieved through years of reform and investment: poverty has exploded, unemployment has risen and the region must now face the specter of a new “lost decade”.
The term, coined in the 1980s when the debt crisis brought the regional economy to its knees, has been widely used by international bodies to describe what to expect on the subcontinent due to the coronavirus.
In October, when publishing its economic outlook for Latin America and the Caribbean, the International Monetary Fund (IMF) warned that Covid-19 would have “a large impact on employment” and could wipe out “a part of the social progress made by the region until 2015 ”.
And according to the international organization, it is only in 2025 that real per capita income will be able to return to the level it was before the pandemic. Or a decade.
According to the Economic Commission for Latin America and the Caribbean (Cepalc), the latest body to adjust its forecast this week, the region will experience a 7.7% contraction in economic activity in 2020, its worst drop in GDP since a century.
Considering the last six years of very low growth (an average of 0.3% between 2014 and 2019) and the four that are estimated necessary to return to the level of pre-pandemic activity, “we can say that the region is facing to a new lost decade ”, replies the executive secretary of the Cepalc, Alicia Barcena.
In November, Cepalc and the International Labor Organization (ILO) reported that 47 million jobs will be lost in the region as 2.7 million businesses have closed, which would bring the unemployment rate to almost 11 %, three points more than in 2019.
Women, young people and low-skilled workers were the most affected by these job losses.
Latin America is the geographic area most affected by the pandemic, with 14.1 million people infected and nearly 478,000 deaths.
The World Food Program (WFP) has sounded the alert: 17 million people “do not have to eat”, not only because of the impact of Covid-19, “but also because of social isolation measures that prevented people from generating income to survive.
In early December, Unicef, the United Nations children’s agency, warned that at least 23.4 million children in Latin America and the Caribbean needed humanitarian aid, three times more than the previous year.
“Never before have so many children been affected simultaneously by multiple emergencies in so many countries,” said Jean Gough, regional director of Unicef.
According to the World Bank, among the 650 million Latin Americans, nearly 29 million could be found in extreme poverty, their proportion rising from 3.9% in 2017 to 4.4% in 2020. Before the pandemic, the BM expected to see their proportion drop to 3.7% this year.
Cepalc now considers it essential that state aid to families and businesses be maintained.
“It is expected that monetary incentives will continue and that fiscal policy incentives will not be withdrawn prematurely. Otherwise, the expected resumption of activity could be cut off, ”warned the Commission.
Even the IMF, traditionally a promoter of adjustment policies, has highlighted the budget support of 8% of GDP that governments have provided to contain the effect of the pandemic, stressing that “these exceptional measures are crucial to support the economic activity in order to avoid even stronger decelerations and more serious social repercussions ”.