Mitigating the impact of COVID-19 in Latin America: time to be bold

By Nora Lustig, Professor of Latin American Economics, Department of Economics, Tulane University and Jorge Mariscal, Adjunct Professor of International and Public Affairs, School of International and Public Affairs (SIPA), Columbia University


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


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Empty streets of Guatemala City during lockdown, March 2020. Photo: Shutterstock

COVID-19 has hit Latin America hard on two fronts. The pandemic and the lockdowns to contain the spread of the virus have shut down significant portions of the region’s economies. However, even if the pandemic were to miraculously disappear from the region, falling demand for exports and tourism, declining commodity prices, interruptions in the supply chain of inputs, shrinking remittances and unprecedented capital outflows are significantly affecting countries’ growth prospects.

The International Monetary Fund (IMF) in its recent World Economic Outlook (April 2020), predicts that the world economy could fall by 3% in 2020 and in Latin America by 5.2% – higher than that observed during the 2008-09 global financial crisis. Still, the IMF’s growth forecasts for Latin America compared to those for advanced countries seem overly optimistic and will likely be subject to downward revisions. Based on data for 48 countries, the OECD has estimated that each month of containment measures translates to an approximate decline in annual GDP growth of up to 2 percentage points. Considering the extent to which the region’s economies depend on trade, foreign direct investment (FDI), commodities, tourism and remittances, in the absence of strong policy responses, we would add an additional decline equivalent to one-third of the total shock. Latin American economies could thus face GDP contractions of 9-10%. Continue reading

COVID-19 and labour markets in Latin America: How to repair the damage?

By José Manuel Salazar Xirinachs, Former Regional Director of the International Labour Organisation (ILO) for Latin America and the Caribbean, and former Minister of Foreign Trade of Costa Rica


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


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Lima, Peru – April 7, 2020. Photo: Shutterstock

The damage of the COVID-19 pandemic and the ensuing global lockdown crisis will be devastating, causing the worst disruption to labour markets in Latin America since the Great Depression. Up to 43 million people – probably more – could be unemployed in 2020. Tragically, the state of labour markets in the region was bad even before the crisis. Repairing the damage while addressing past structural legacies is possible, but it will be slow and challenging, and will require something most countries in the region have not done well in the past: a massive focus on microeconomic policies for accelerated productive transformation, and technological and human talent development.

The damage has only just begun and is still evolving, but already looks severe. The Economic Commission for Latin America and the Caribbean (ECLAC) estimates a contraction for the region of -5.3%, the IMF of -5.2%, and the World Bank of -4.6%. All projections now point to severe recessions in all countries in the region. Continue reading

Responding to COVID-19 in emerging economies: lessons from the financial sector

By Mauricio Rosillo, Corporate Vice president, Grupo Bancolombia


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
This blog is also a part of a thread looking more specifically at the role of private sector actors in responding to the impacts of the COVID-19 crisis in developing countries.


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COVID-19 is plunging the world economy in the most severe crisis of recent times and threatens hard-won gains in terms of poverty reduction, food security and economic empowerment. What can the private sector, and in particular the financial sector, do to protect and advance sustainable development and well-being for all?

Governments, companies and citizens must quickly adapt to shoulder this unprecedented situation. This is particularly the case in emerging and developing economies where socio-economic vulnerabilities are higher and state capacity is sometimes low. Consequently, support from other socio-economic actors, notably large firms, is even more necessary.

The immediate priority is to protect people’s health and income. This crisis, together with public health measures such as social distancing and restrictions to mobility, is changing daily routines for workers and firms and reducing their ability to generate income. Latin American economies are not immune to these effects. The high levels of informality and vulnerable Micro, Small & Medium Enterprises (MSMEs) make the policy responses more complex. Coordination and coherence across different actors is fundamental to halt the pandemic, minimise the negative socio-economic consequences and put the economy on a strong and sustainable development path. Continue reading

Latin America and the Caribbean in the time of COVID-19: Preventing the vulnerable from falling behind

By Federico Bonaglia, Deputy Director, OECD Development Centre, and Sebastian Nieto Parra, Head of Latin America and the Caribbean Unit, OECD Development Centre


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


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Local worker cleans the streets amid the COVID-19 outbreak, Vina del Mar, Chile

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The necessary containment measures against COVID-19 have engendered an unprecedented global economic crisis, combining supply and demand side shocks. Now, the pandemic is affecting Latin America and the Caribbean (LAC) and countries are bracing for the ripple effects. Just months ago, many countries in the region experienced a wave of mass protests driven by deep social discontent, frustrated aspirations, persistent vulnerability and growing poverty. The crisis will exacerbate these problems.

Beyond the magnitude of the impacts on already weak health systems – some 125 million people still lack access to basic health services – the overwhelming socioeconomic impact of the crisis could disproportionately fall on vulnerable and poor households if ambitious policy responses are not put in place. Continue reading

Covid-19: time to unleash the power of international co-operation

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By Mario Pezzini, former Director, OECD Development Centre and Special Advisor to the OECD Secretary General on Development


This blog* is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


Development co-operationThe rapid spread of the dire human, social and economic impacts of the coronavirus crisis shows just how interconnected we are. International co-operation has become –literally– vital.

A health crisis has set off a global economic crisis, where shocks on the demand and supply sides are combining in an unprecedented scenario. Many developing countries are bracing themselves. While Europe is struggling to contain and cope with a spiralling number of cases and fatalities, the effects in countries where health systems are already weak, economies are highly dependent on global demand, and strict containment policies are more difficult to implement, could be even more disastrous.

Major outbreaks in developing countries could cause the collapse of weak health systems and expose gaps in social protection programmes, especially in Africa, where so many schemes rely on official development assistance. A humanitarian crisis may be in the making: travel restrictions affect the delivery of humanitarian assistance, and infections in refugee camps – largely hosted in developing countries – will be difficult to fight. The ILO estimates that 25 million jobs could be lost worldwide, possibly more, as the majority of workers in developing countries are in the informal economy. Continue reading

Social discontent in Latin America through the lens of development traps

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By Sebastián Nieto-Parra, Mario Pezzini and Juan Vázquez, OECD Development Centre


This blog is part of an ongoing series evaluating various facets
of 
Development in Transition


LATAM-Social-discontent.jpgUntil recently, rising levels of citizen dissatisfaction with public services and institutions in Latin America might have merely been pictured as an upward line in a graph. However, it seems to have reached a breaking point. Growing social discontent has boiled over into protests across several Latin American countries over the past weeks. While these protests are complex and multifaceted, understanding the underlying causes is essential to defining policy priorities that may help address the structural sources of discontent.

GDP growth is not alone in driving social unrest, as protests have not necessarily taken place in countries with the lowest growth rates or at times of lower economic dynamism, like the 2008 crisis.  Furthermore, income gradually ‘delinks’ from well-being outcomes, as countries move up the income ladder. This has clearly been the case for most Latin American countries since the 2000s (OECD et al., 2019a). Continue reading

Security, violence and fiscal policies in Latin America

By Eduardo Salido Cornejo, Public Affairs and Policy Manager Latam, Telefonica    

Police-Latin-America-ViolenceViolence is a central theme in Latin American popular music. Films and paintings portray well-known tragedies affecting Latin American societies. Art imitates life according to the 2017 Latinobarómetro since Argentinians, Mexicans and Panamanians declare public safety their number one problem. It is second on the list of citizen concerns in Colombia and Venezuela, just behind supply issues in Venezuela and the peace process in Colombia. Violence, crime and insecurity are the region’s main issues ahead of unemployment, economic problems or inequality.

According to data from the Brazilian think tank Igarapé Institute, 33% of all homicides in the world take place in the region, which is home to just 8% of the world’s population. Of the 20 countries with the highest homicide rates, 17 are in Latin America, where 43 out of the world’s 50 most violent cities are located. For every 100 000 inhabitants in Latin America, 21 are murdered, while the world average is seven. In the last decade, the homicide rate in Latin America increased 3.7%, while the population grew 1.1%.1

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Upgrading International Development Co-operation

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By Alicia BarcenaStefano Manservisi and Mario Pezzini

Dev-in-Trans-Barcena-Manservisi-PezziniIn an era when the benefits of multilateralism are being questioned, income inequality is growing, and innovation and technology are transforming how people learn and work, the world needs a more equitable approach to globalization. Can Latin America and the Caribbean offer a way forward?

PARIS – These are hard times for international cooperation. With rising protectionism, burgeoning trade disputes, and a troubling lack of concern for shared interests like climate change, the world seems to be turning its back on multilateralism.

And yet cooperation remains one of our best hopes for addressing humanity’s most complex development-related challenges. Just as the Marshall Plan rebuilt a war-ravaged Europe and the Millennium Development Goals lifted some 471 million people out of extreme poverty, the international development agenda can still deliver results thanks to the combined potential of the 2030 Agenda for Sustainable Development, the Addis Ababa Action Agenda, and the Paris climate agreement.
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Lessons learned from structural transformation in least developed countries

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By Daniel Gay[1], Inter-Regional Adviser on LDCs, UN Department of Economic and Social Affairs

To learn more about countries’ strategies for economic transformation, including a session on Least Developed Countries (LDCs), follow the 10th Plenary and High-Level Meeting of the OECD Initiative for Policy Dialogue on Global Value Chains, Production Transformation and Development in Paris, France on 27-28 June 2018 

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Bangladeshi garments workers in Dhaka, Bangladesh. Photo: Shutterstock.com

At Leather Wings, a small shoe-making outfit based in central Kathmandu, four women sit in a small room cutting up bright red cowhide imported from India. Next door, a dozen of their colleagues stitch the shapes together on sewing machines. The owner Samrat Dahal says the boots, designed by a German expat, sell via the Internet in India, China and Italy.

The company, founded in 1985, sums up some of the issues facing the Nepalese economy: entrepreneurial leaders at the helm of a committed workforce making a competitive and quality product for which overseas demand is ample. The problem isn’t finding buyers; it’s scaling up production to meet that demand. Exports by the handful of players in Nepal’s shoe industry totalled only USD 23 million in 2015. The task of boosting production in Nepal is doubly pressing given that the country already meets the criteria to graduate from the least developed country (LDC) category, something that the government wants to happen as soon as 2022. Nepal’s productive capacity predicament is typical of many LDCs. Moving onto a path of long-term prosperity requires structural transformation that expands production via manufacturing, services and higher-productivity agriculture.

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Stabilising Argentina’s Public Expenditure

By Dr. Sebastian Galiani, Professor of Economics, University of Maryland 1

development-financeThe present government in Argentina inherited a particularly high level of public spending compared to the country’s own history. Consolidated public expenditure for the three levels of government − nation, province and municipalities − reached 42.2% of Gross Domestic Product (GDP) in 2015. This is an almost 17 point hike from before the 2001-2002 crisis when this expenditure was 25.6% of GDP.

Three areas drove such growth in public spending. First, the public wage bill grew 4.8 points of GDP since 1998 − mainly driven by the provinces and municipalities. Second, pension benefits grew 4.7 points of GDP since 1998. And third, private transfers increased 5.0 points of GDP, of which subsidies to public services represented 3.6% of GDP. In contrast, public investment almost did not grow during 1998 to 2015, at 1.4 points of GDP. The end result was a level of primary spending that is higher than that of all Argentina’s Latin American neighbors, and up to 8 percentage points above what is expected for a country at its level of GDP per capita.

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