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The Economic and Social Impact of Covid-19 in Latin America and the Caribbean: The Role of the International Community

The Economic Impact of COVID-19 in Latin America and Caribbean

ECLAC has estimated that there will be 12 million more unemployed people in 2020 than in 2019.

Latin America is used to experiencing crises but the Covid outbreak is perhaps the most dramatic one to date. “The social, economic and political impact of the pandemic on the region will be enormous and greater cooperation and integration are necessary in order to achieve a more equal and less fragmented world”, warned Susana Malcorra, Dean of IE School of Global and Public Affairs, and Alicia Bárcena, Executive Secretary of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), keynote speakers of an insightful webinar moderated by German Rios, Chair of the Observatory on Latin American Politics and Economics.

Both joined this session under the aegis of the IE School of Global and Public Affairs Transatlantic Relations Initiative to give their take on the role of international organizations and the global community in attenuating the negative consequences of the outbreak in the region.

“This crisis came at the worst possible moment because we have other crises at the same time”, Ríos began, mentioning the collapse of exports, the capital outflows to safer countries, the drop in remittances, a collapse in tourism and everything that has to do with the lockdown.

Latin America and the Caribbean are marked by “growing vulnerabilities” and warned that the impact on growth, in the best case scenario, will be -5,3% and trade is going to fall probably by 15%, Ms. Bárcena highlighted. But “the most dramatic consequences” will be the loss of jobs, she said, stressing the high incidence of jobs in the informal sector in the region.

ECLAC has estimated that there will be 12 million more unemployed people in 2020 than in 2019, which will mean a total of 37.7 million people without a job. According to the same estimates, there will be a rise of at least 4.4% in poverty, which means 28.7 million more people living in poverty and most probably 15 or 16 million living in extreme poverty.
“The pandemic is going to bring hunger, poverty, inequality and on top of this, we have a very poor welfare system”, she sentenced. “This is why we are proposing a basic emergency income of $ 140 for the next 6 months for the poorest, which are 215 million people in the region”.

Susana Malcorra, former Chief of Staff to the UN Secretary-General and Minister of Foreign Affairs of Argentina, agreed that it is time to find ways to support the ones who have less and provide the safety nets that are required. “Otherwise this is all going to develop into something more dramatic. The “Save yourself” approach will not work’”, she pointed out.

She also noted that the pandemic came at a very particular social moment and warned that “in the most unequal region in the world” there will be a political impact that we have not fully appreciated.

Regarding the role of the international community, Dean Malcorra urged for more cooperation and emphasized that this crisis has taught us that we are all interconnected and that the big challenges that we face are all global challenges that must be addressed multilaterally: climate change, terrorism, illegal flows of money, migration. “We have no choice”, she claimed, calling for international institutions to restructure and reset as a result of this crisis, in line with the needs of the 21st century.

The United Nations could be the best place bring all parties to the table and define a set of possible solutions to be submitted for the consideration of member states. As Ms. Malcorra explained, we need a new social compact in which all players come together to define how to address these problems with a sense of shared but differentiated responsibility based on the relative weight of each party.

On the other hand, she called for the international community to pay more attention to the Agenda 2030 and to put it at the center of each political agenda “as the compass that brings all of us together and does not leave anyone behind”.

Bárcena agreed that the region needs a new social contract and urged international institutions to cooperate more, but also to understand that the situation of middle-income countries is very diverse, as there are countries that can go to the markets to obtain capital and liquidity, but others do not have that capacity.

The webinar ended with a call to search for global solutions and to reflect upon what the region wants after the pandemic.

“Latin America stands a greater chance by coming together and should leave aside ideological differences”, highlighted Malcorra. “It was a leading region in terms of integration, multilateralism. Our countries were the founders of the United Nations, why is it that we cannot go back to that spirit?,” she concluded.