More social protection, key to post-COVID recovery in Latin America

Greater social protection and the formalization of economies to combat job insecurity are two of the main proposals put forward by four international organizations as urgent measures to combat the economic crisis after the pandemic.

Addressing these two edges will be essential to avoid reversing the socio-economic advances of recent decades in the region, they point out in the report “Economic Outlook for Latin America (LEO) 2021”.

This publication is produced jointly by the Center for the Development of the Organization for Economic Cooperation and Development (OECD), the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), CAF-Development Bank of Latin America and the European Commission.

“The region is going through an unprecedented challenge, which will require coordinated spaces and solid alliances to build new social contracts,” said the executive secretary of ECLAC, Alicia Bárcena.

The informality rate is “extremely high”, above 58%, said the international official, which leaves many people in a situation of “great vulnerability”, especially women and young people, linked to more precarious sectors.

With record deaths, extensive quarantines or a shortage of equipment and medical care, Latin America, the most unequal region in the world, was one of the most affected in health and economic terms by the health crisis.

COVID-19, which already leaves 46.5 million total infections and 1.5 million deaths, caused a 6.8% contraction of GDP in 2020 – the highest in 120 years – and raised the levels of poverty and extreme poverty to 33.7% and 12.5%, respectively.

“Return your eyes to the basics”

The report recognizes the efforts made by the countries of the region to protect the most vulnerable groups, but highlights that nearly 40% of workers did not have social protection when the crisis began.

As a solution, Bárcena proposed, it will be essential to move towards “universal social protection systems” and “turn our eyes to the basics: health care, education and labor protection.”

Mathias Cormann, Secretary General of the OECD, highlighted the importance of “improving fiscal policies and tax administration in public spending” to face the possible new waves of COVID-19 and the appearance of new variants.

“The region entered the health crisis with tax revenues that represent less than 23% of GDP, well below the average of the OECD countries, of 33.8%,” he lamented.

Integration and climate change

According to ECLAC projections, the region’s economy will grow by 5.9% in 2021 -with increases in only nine of the 33 countries in the region-, and will not recover to pre-pandemic levels until 2023-2024.

To accelerate this process, the report points out, it will be necessary to strengthen regional integration and cooperation, as well as the design of international debt management, paying special attention to the challenges of the small island states of the Caribbean.

“Fiscal policies and mobilization of domestic resources will not be enough. We will need complementarity and concessional financing, ”said Bárcena.

The executive president of CAF, Sergio Díaz-Granados, added that coordinated work through renewed alliances and a broad cooperation agenda is the only way to face both the pandemic and climate change.

On the environmental issue, the biggest challenge will be land use and deforestation, added Díaz-Granados, which function as “the most efficient technology to fight greenhouse gas emissions.”

“In this region we have 16% of the territory and almost 50% of the biodiversity. There is not going to be a solution for climate change without Latin America ”, he concluded.