Coronavirus economy: ECLAC's warning that the pandemic will increase unemployment & poverty in Latin America

In the highest spheres of power, the economy came first... until the Covid-19 arrived.

This disease caused by a new coronavirus emerged in China has already infected more than half a million globally and until Saturday has claimed more than 28,000 lives, he says counting John Hopkins University in the United States.
In the highest spheres of power, the economy came first... until the Covid-19 arrived. This disease caused by a new coronavirus emerged in China has already infected more than half a million globally and until Saturday has claimed more than 28,000 lives, he says counting John Hopkins University in the United States.
Coronavirus | "This is going to be a lot like a war economy": ECLAC's warning that the pandemic will increase unemployment and poverty in Latin America
The fear that it will collapse healthcare systems around the world, from the most precarious to the most advanced, has led to something unprecedented: that for the first time, governments defend public health, not only above the economy, but coast of it.
Alicia Bárcena, executive secretary of the United Nations Economic Commission for Latin America and the Caribbean (Eclac), warns that a global recession is coming that will cause the region's GDP to decrease, unemployment to rise and millions of people to join poverty rates.
A crisis so deep that it will force us to rethink globalization and our economic system.
Given the closure of borders and the reduction of transport, it will be important to point to regional integration and self-sufficiency, says Bárcena in this interview, given by telephone from Chile.

It has also called for a lifting, albeit temporary, of sanctions against Cuba and Venezuela so that they can weather the difficulties of the fight against Covid-19.

Compared to economic crises like the one in 2008 or others that Latin America may have experienced, is this one greater?

Definitely much higher because we are facing a deep recession that will surely cost in double digits in the next two quarters of the economy. And, for Latin America, this is very serious.
We have made preliminary projections and we have seen that, simply calculating the impact on China and Europe, which are two of the region's main trading partners, GDP will fall by 1.8%.
And in terms of internal consequences of local economies, this can reach -3% without a doubt.

In addition, we face fragmented health systems, where there are logically a series of problems because there are large gaps in access to them. Of the employed persons aged 15 years and over, 57.3% of the population has health coverage.
And at the lowest levels, the poorest, only 34% have health coverage.
So yes, we are facing one of the strongest crises in healthcare systems.
We have calculated that if the economy fell by 1.8%, this would have an impact of a rise in unemployment of 10 percentage points.
This would have a strong impact on the poorest families and on inequality. In fact, we also estimate that with this drop in GDP and this increase in unemployment, the number of people living in poverty would increase from 185.9 million to 219.1 million.
And in extreme poverty, they would increase from 67.5 million to 90.7 million. In other words, yes, we are talking about a very strong impact on households, on people, on small and medium-sized companies and on those who are self-employed.

For this year, ECLAC had estimated that Latin America would grow 1.3%. Now, with the hit of the coronavirus in China, it tells me that it calculates a fall of 1.8%, but that this may be in double digits ...
In the next two quarters globally. In Latin America, the region's average would be -1.8%, simply considering the impact of China and Europe. We even believe that this could fall even further, by 3%, for example.

Because the United States has not been taken into account yet ...

Exactly, USA missing and the region's own economies. What is going to happen within the internal economy, consumption, for example.
If household income is going to fall because there is going to be a job loss, it is going to have a very strong impact [on consumption].
From a health point of view, this is seen as an absolutely necessary movement to save millions of lives. But if we look at it only from a strictly economic perspective, it looks like suicide, right? We are, in a way, disarming the current economic system, are we going to be able to reassemble it as it was?
I think not, definitely. Value chains have been broken.
One of the transmission channels for our region is the decrease in the economic activity of China, which was an important destination for our exports, but also one of the most important manufacturing countries in the world.
Furthermore, almost everyone was importing parts and intermediate goods from China. In other words, there has been a rupture or interruption of global value chains and re-rearming these chains is going to be very difficult ...

There is an expectation that this crisis will be temporary, that it will last around six months. Hopefully and so be it. But the truth is that there are aspects of the economy that, indeed, are going to be very difficult to recover.
So, you have to rethink the economy from many perspectives.
We, for example, are seeing that it is going to be very important that the economies of Latin America and the Caribbean resume regional integration, that is, that we try to return to a kind of regional self-sufficiency.
This is going to look a lot like a war economy… Transportation has been cut, barriers have become enormous.
So, what should be seen is how a different economy, more integrated towards the local, is going to be reconstituted, also looking for self-sufficiency guidelines, for example, food, which is another of the issues that has not come up, but surely a future will come. Very significant food shortages, especially in vulnerable import-dependent economies.
Just speaking of integration, right now we are at a time when we are closing our borders and some states even prohibit internal movement. Will it end in coronavirus with globalization?
I think that is one of the risks: that globalization, at least as we knew it before this pandemic, will definitely be different.
I think not for the sake of connectivity, you are surely in Europe and I am in Chile, but that connectivity allows us to communicate.
However, this is definitely not going to be a globalization of value chains. That is what is going to be more important: the change in the modes of production and in the modes of consumption.
ECLAC estimates that the crisis unleashed by the new coronavirus will increase the number of poor people in Latin America by millions.

And as the executive secretary of ECLAC, what do you find most worrying about the current crisis?

Well, several things. On the one hand, I am concerned that our health systems have the capacity to respond ...
And second, protect the income of families. We are concerned that there are a large number of people who may be left without jobs and without income. I really think that is the central issue.
We have calculated that in the region there are 32.7% of people who are self-employed, who are unskilled and, fundamentally, are in informality.
At ECLAC we are monitoring what countries are doing and trying to see what the best options may be ...
Also proposing, I must tell you frankly, that, for example, the sanctions against Venezuela and Cuba be lifted, at least temporarily.
We cannot isolate these two countries from the arrival of pharmaceuticals, fuel, food ... They are countries that import practically 100% of their food and I think that these are concrete measures that we should monitor and take.
In a conference he gave last week, he said precisely that, if the sanctions against Venezuela were not lifted, one would practically "kill those people." How serious is the situation?
I think it is very serious. Cuba, despite the sanctions, is even offering help, sending doctors to Italy and elsewhere.
But in the case of Venezuela, hospitals do not have water, they do not have electricity, they lack medicines, equipment, and soap.
So much so that they ask to wash their hands, but if there is no soap, how do they do it?
So, I believe that this call is fundamental and also a call to the International Monetary Fund (IMF) and the World Bank to sincerely consider postponing the payment of external debts and even, in the cases of countries with less resources, the cancellation of bilateral and multilateral debts.

Just recently, the International Monetary Fund denied aid to Venezuela.

So, imagine if Venezuela is going to the IMF and this aid is denied and sanctions continue, because we are really sentencing or condemning a people.
Because, regardless of what may later be said politically, it will obviously have to be analyzed later; right now, there is an emergency and it is very important to raise it.
Financial support to developing countries, to all, and the preparation of a common exit strategy in the face of the crisis are essential.
Latin America has not yet managed to assimilate and respond effectively to that great migratory crisis that we have: the diaspora of more than four million Venezuelans, many of them, spread throughout our region and in vulnerable conditions. How will the coronavirus crisis impact you, is something that concerns ECLAC? Should governments take economic measures specially designed for them?
Well, without a doubt, I think the first thing is to avoid xenophobia in the sense that there are many migrants who are in neighboring countries.
We must support them and give them the same conditions of health care and income that will be given to the rest of the population. It is a problem because many migrants are illegally and even in some countries we do not know where they are.
Sometimes they also live in very precarious conditions, very crowded, and that is why we think that, for example, organizations like UNHCR [United Nations High Commissioner for Refugees], such as IOM [International Organization for Migration], should have all the support to be able to help these people, who are finally a quite vulnerable population that is far from home.

Within the region, which countries are leading the response to the coronavirus and which are lagging behind?

I would say that one of the countries that is leading this action is Argentina, which is the one that has taken the most measures in terms of border restrictions, preventive quarantines, and support for workers.
Despite the enormous problem it has with its external debt, Argentina has taken very strong and very deep actions.
The other has been Peru, which has also taken very powerful actions, including these supports for the income of poor households.

I think Chile is also a country that is taking very important actions. Paraguay, El Salvador, are countries that have taken very hard measures to contain the spread of the virus. I believe that these countries are the ones that are working harder.

Peru was one of the first countries in the region to dictate self-confinement.

In the case of Mexico, I think they are already entering a process of reduced activity. Mexico has a fairly good public health system; therefore, I think that the Mexican health authorities are very aware that they have to start up all their infrastructure in order to support the population.
It is one of the countries with the largest population, like Brazil. I think that Brazil and Mexico may be the ones that have taken a little longer to take stronger actions, along with Nicaragua, but we think that, well, somehow, they are already joining.

Precisely Mexico and Brazil have been widely criticized for this slow response to the virus. Some would even call it a denialist.

I think that has already happened, denialism has passed and above all, what I do believe is that they are following the indications of the World Health Organization (WHO).
The WHO has not said that it is necessary to go into a total quarantine. The WHO has clearly said that this is a pandemic that is moving from the northern hemisphere to the southern hemisphere.
Of course, all the forecasts of the case must be taken, but what is happening is that some countries are taking it more gradually, which does not mean that they are not taking it seriously.
I believe that everyone is very aware of the importance of acting and above all of isolating, or staying at home. Anyway, those are the recommendations that the WHO is making.
There are some countries that are investing in aid for the poorest households, so that they can survive the days of self-isolation. But if these days become weeks or months, how sustainable over time will these social benefits be?
I think that countries should plan, at least, for the next six months.
The WHO was talking about 12 weeks, but maybe 24, right? And also, in the southern hemisphere we are entering into winter ...
Nobody has the magic ball to know what can be done, I am talking about what we have managed to evaluate. But beyond that, it is very difficult to know what can happen in the next six months.
What I can tell you is that there is going to be a great recession worldwide in the next six months, that governments have to prepare and prop up the poorest households, those who have no income, informality... For that you have to prepare for at least the next six months.

Can poverty figures be avoided in any way?

Two things count in poverty alleviation: employment and conditional transfers, fiscal transfers.
In this case, what worries is that these fiscal transfers are going to have to be greater and are going to have to reach more people. Therefore, countries have to program that, in addition to lowering health costs.

For example, here in Chile, prices are beginning to be controlled. A price control, for example, so that the exam costs much less or is even free.
There must be universal access to coronavirus testing, medical treatment, and certainly, there must be income in every household, at least a minimum.
That is what countries have to do with: how they deliver a minimum citizen income to households for the next six months. That is our recommendation.

Any final thoughts?

In this frenetic life of globalization, we have sickened the planet: today we have a planet sick with polluted oceans and rivers, devastated forests, biodiversity, and a massive expanse of extinction for some species.
So, we also have to reflect on whether what we were doing in terms of the economy, the system, the economic model is what we have to continue.
I believe that we must thoroughly rethink what kind of development model should emerge from this crisis.
We never expected that a problem of this nature would arise and yet here we are and we have to make efforts to recap and think.
If it is going to be capitalism, very well, but a different capitalism, a much more inclusive capitalism, much more sustainable and re-based on local economies.


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