Latin American economy will improve, but region must better educate its next-generation workforce

The good news for Latin America is that the economic crisis tied to 2020’s coronavirus pandemic has hit rock bottom, and that the region’s economy will grow in 2021. However, is that it will be a slow-motion recovery, and Latin America will be the world’s region that will grow the least this year. That’s the bad news.

This is the conclusion I heard in interviews with some of the leading international economists focusing on Latin America. And, while economic predictions are far from an exact science, they offered some compelling reasons to back up their forecasts.

While the world economy will grow by about 5.2 percent in 2021, and emerging countries are expected to grow by 6 percent, Latin America’s economy will expand by only 3.6 percent this year, according to International Monetary Fund (IMF) forecasts.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) makes a similar projection: It says Latin American economies will grow by an average of 3.7 percent, well below the world average.

Specifically, Brazil is projected to grow by 2.8 percent this year; Mexico, by 3.5 percent; Colombia, by 4 percent; Chile, by 4.5 percent; Argentina, by 4.9 percent; and Peru, by 7.3 percent, according to the IMF’s forecast.

There are two main reasons for Latin America’s slower-than-average recovery, I was told.

First, Latin America will be coming back from its worst economic fall in more than a century. Second, this will be an election year in several countries, and the prospect of leftist and populist victories is likely to inhibit private-sector investments for the time being.

Alejandro Werner, head of the IMF’s Western Hemisphere department, told me that Latin America is not likely to reach its 2019 pre-pandemic economic status until 2024.

In addition to last year’s huge economic descent, legislative and presidential elections in several countries may create “political uncertainty” and a “waitand-see” attitude among investors, Werner said.

Argentina and Mexico will hold key legislative elections, while Chile, Peru, Ecuador and Honduras will have presidential elections.

While economists with international organizations are reluctant to talk about specific elections, many fear that social discontent over the current economic crisis could lead to the election of radical populist leaders or, at the least, to new presidents who will postpone much-needed economic reforms.

I don’t expect to see a political or economic meltdown in Latin America this year. It’s two biggest export markets — China and the United States — may do better than expected and buy more goods from the region. In addition, a likely continuation of U.S.-China tensions during the Biden administration could lead more U.S. multinationals to move their factories from China to Mexico or other Latin American countries.

But there are other trends that worry me more than the possible outcomes of this year’s elections, because they will have an impact for many years.

First, Latin American schoolchildren, who were already lagging behind their counterparts in other parts of the world before the pandemic, lost an entire school year in 2020. They lost much more school time than children in the United States, Europe or China, because while students in the northern hemisphere had their three-month summer vacations during the pandemic, South America’s school year goes from March to December.

Ninety percent of schoolchildren in most South American countries lost their whole school year, according to World Bank estimates. That’s likely to dramatically increase dropout rates.

Second, while the COVID-19 pandemic accelerated the global shift toward the digital economy — remote work, e-commerce, telemedicine, etc. — new statistics show that the region increasingly is falling behind in the new internet-centered world economy.

While 40 percent of the people in developed countries have jobs that can be performed online, and the average in the developing world is 28 percent, in

Latin America it’s only 20 percent, according to the IMF.

All of this means that Latin America will have a less-educated and more technologically isolated workforce. It’s the worst possible combination to compete in the 21st-century internet-centered economy.

Yes, this will be a better year for Latin America than 2020. But if countries in the region don’t focus on improving their education standards and investing in technology, last year’s economic crisis may drag on for much of this decade, if not beyond.