Covid-19 has impacted Latin American economy and society severely

A UNECLAC report (March 2021) stated that 22 million more people fell into poverty with increasing unemployment in the region.

After more than a year of the Covid-19 pandemic, it is well established that the dearth of effective pharmaceutical treatment has overwhelmed national healthcare systems. Hence, governments have had to authorize non-pharmaceutical interventions (NPIS) such as lockdowns and restrictions in movement to contain its spread. There is still a lot of ambiguity and lack of clarity about the the dynamics of Covid-19. Studies, however, indicate that non-pharmaceutical interventions have been necessary but have had at the same time, adverse socio-economic impact.

In Latin America, Brazil was the first country in the region on February 25, 2020, to report the disease in Sao Paulo, followed by Ecuador on 29 February. By mid-april 2020, more than 65,000 cases of Covid-19 were recorded in Latin America. This number has been steadily rising. There were reports that the streets of Guayaquil, the economic centre of Ecuador had corpses that were left there for days because of the city’s limited capacity to cope. By 25 May 2021, more than 449,858 people had died from the pandemic in Brazil alone, according to the John Hopkins University Coronavirus Resource Center. Countries in the region have had very divergent policy reactions to the pandemic. While some countries such as Argentina announced immediate restrictions, other countries like Brazil have not been supportive of NPIS. News reports of Brazilian President Jair Bolsonaro openly announcing that he will not sanction a national lockdown, with the support of his followers, have been making headlines yet again. During a huge rally that was held for him in early May 2021 many of his followers raised the slogan “Autoriso Bolsonaro” (“I authorize Bolsonaro”). Bolsonaro’s argument and reasons for avoiding any serious measures towards a national lockdown is based on protection of the economy. This has been challenged by his opponents who point to the increasing deaths and the inability of the state to tackle the problem with a health care system that is collapsing.

For emerging economies, non-pharmaceutical interventions (NPIS) to help prevent the surge in the pandemic that were put in place in 2020 along with falling commodity prices led to current account deficits and decreased capital flows. Before the eruption of Covid-19, Latin America was one of the slowest growing regions amongst the developing world. In the early part of the 21st century, the demand for commodities from Asia (especially China) had inflated commodity prices, but this trend was reversed accompanied by massive capital flight and sluggish capital inflows. In March 2020 itself, Brazil, Colombia and Mexico saw a capital flight of US$15 billion with prices of oil, coal, zinc falling drastically and lowwage workers and informal labour suffering the most as they were hit the hardest with welfare states slowly losing their grip.

With the start of the pandemic, the International Monetary Fund in its World Economic Outlook (April 2021) gave an estimate of 7% contraction of the economy for the Latin American region in 2020. Along with decline in trade, travel and tourism, a UNECLAC report (March 2021) stated that 22 million more people fell into poverty with increasing unemployment in the region. Most countries in Latin America have a large informal economy. For instance, a middle income country such as Colombia has almost half its population working in the informal economy, which has been hard hit by the economic restrictions. These people live in informal settlements which also makes them difficult targets for government subsidies and services.

The spread of Covid-19 along with restrictions, a weak police force and the disruption of trade and product supply chains has dangerous implications for society. While crime, violence and homicides seemingly saw a decline during the first few months of the pandemic, it was very short-lived. Fresh waves of violence broke out in the region with organised crime taking this opportunity of a weakened system to expand their influence.

This means that policies to address the current problems in Latin America will have to reflect on the fact that it is the small firms that employ about half the work force but it is the big and more established firms whose workers contribute to a large part of the national income. It is the recently unemployed and self-employed labour force in the informal sector that needs assistance with targeted and efficient monetary transfers. Are existing government programmes (such as cash transfers) able to respond rapidly and pointedly? Can these programmes be directed to the individuals most impacted by the economic consequences of the non-pharmaceutical interventions that were put in place to check the spread of Covid-19? The problem that governments have been encountering is that those in genuine need of this assistance may not be benefitting by the existing programmes. Another alternative proposed by a report released by UNECLAC on 12 May 2020 recommended temporary cash transfers by governments, suggesting a universal basic income to guarantee the right to survive.

The socio-economic repercussions of not just the disease but also government policies have to be anticipated in advance and projections of its implications clearly defined. Governments, thus need to think and rethink their policy responses. Short term incentives such as extending loans to small businesses providing credit or social assistance and services have to go hand in hand with strategies that address long term economic recovery with innovative and sustainable technology. Latin America and the Caribbean region with its bounty of resources has tremendous economic potential and a modest recovery for the region has been predicted this year but careful consideration should be given to the way forward. Regional multilateral cooperation with a mix of nonpharmaceutical and pharmaceutical interventions is a step towards the long healing process that lies ahead.

Priti Singh is Associate Professor at Centre for Canadian, US & Latin American Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.