Cooperation is a key variable for the recovery of Latin America and the Caribbean in the post-pandemic phase The novel coronavirus pandemic has had a major impact on all regions of the world. Personal and social damage apart, the world economy has contracted in a way never seen since the Great Depression of the last century.
And social damage has been particularly high in the Latin America and the Caribbean region, which has registered a very high death rate per million people. There has been no effective policy to contain the spread of the virus in this region. With government machinery mostly paralyzed, social distancing measures were not implemented properly. It led to a substantial fall in economic activity. Peru’s GDP fell by 27.2 percent in the second quarter of 2020, Brazil’s 9.7 percent, Chile’s 13.2 percent, Mexico’s 17.1 percent and Colombia’s 14.9 percent.
In contrast, immediately after the pandemic was confirmed in China, the country locked down the city of Wuhan, Hubei province, and managed to contain its spread. After falling 6.8 percent in the first quarter, when several activities were stopped, China’s economy grew by 3.2 percent in the second quarter, the best result among G20 economies.
It is worth mentioning here that the LAC’s economy could have been worse but for the Chinese economy’s rapid recovery. While exports to the United States, Europe, Japan, and intra-regional markets fell sharply, Chinese demand for soy, iron ore, meat, copper and other commodities prevented LAC’s foreign trade from collapsing.
For example, Argentina’s exports to China in the first half of the year grew by 20.6 percent, while sales to Brazil, the US and the European Union fell 31.7 percent, 22 percent and 19.7 percent respectively. The growth projections for LAC economies in 2020 are not promising. The Economic Commission for Latin America and the Caribbean estimated in April that the GDP for South American countries would see an average drop of 5.2 percent, Mexico and Central American countries 5.5 percent and the countries of the Caribbean 2.3 percent. These figures are reflected in a significant increase in unemployment, in the increase in poverty, and also in a worsening of the already weak fiscal situation in LAC economies.
Against this backdrop, we ask ourselves how political, economic, and social strategies should be organized to help overcome the crisis in the region. It’s not easy for sure. To make matters worse, the per capita income in LAC economies has been stagnant since the 2014 commodity crisis, companies show overcapacity and governments are left with little fiscal margin to introduce corrective policies. The situation is aggravated by many countries following austerity measures at a time when the situation demands increased public spending, as noticed in the European Union’s paradigm shift of approving a 750 billion-euro ($886.36 billion) aid package for countries most affected by the pandemic. China, the US, and other large economies are doing the same.
Even if this logic is reversed, there are doubts that countries can get out of this situation alone. Hence the of international cooperation is important for the recovery of LAC economies. Normalcy in everyday life hinges on the development of an effective vaccine against COVID-19. Many countries are trying, but China’s promise to treat a vaccine as a “public good” is very promising, since the poorest countries and regions will not be able to afford the costs involved.
The second stage concerns with the normalization of international trade, particularly overcoming the economic and political barriers being erected by important countries. The break in production chains because of the pandemic cannot be a justification for dismantling globalization. It is necessary to strengthen multilateralism and organizations so that economic and trade issues do not get overly politicized. The recovery of the world economy needs greater, not lesser, integration.
One way to accelerate the recovery of the LAC economy is to promote investments in infrastructure, to generate jobs and income, and also to build the foundations for more sustainable development, particularly if we base the concepts on the 2030 Agenda for Sustainable Development. The clean energy and the potentials of the Fourth Industrial Revolution, such as 5G, automation, and the internet of things can contribute to the economy’s renewal, treating the current crisis as an opportunity to move forward.
–The Daily Mail-China Daily News Exchange Item