Latin America’s economy will close 2021 below pre-pandemic levels – World Bank

RIO DE JANEIRO, BRAZIL – On average, Latin America’s gross domestic product (GDP) will grow 6.3% this year, a better outlook than the entity’s 4.4% forecast 7 months ago, but lower than the 6.7% regional GDP decline last year.

“The region is slowly emerging from the crisis and growing again, yet despite some new emerging sectors, the rebound is weaker than expected,” said World Bank Chief Economist for Latin America and the Caribbean William Maloney in an online press conference from Washington.

Latin America has issues in infrastructure, education, energy policy, entrepreneurship and innovation that predate the pandemic, and unless they are addressed, growth will not be enough to reduce poverty, the expert said. “We have to focus on long-term structural problems as well as reduce short-term uncertainty,” Maloney said.

Forecasts for 2022 and 2023 show growth of less than 3%, which Maloney said is insufficient to reactivate economies and reduce poverty. “These forecasts are not much higher than the low growth rates of the past decade when we grew much less than the rest of the world.”

Overall, the recovery has been disappointing for a region that relies heavily on international trade, the report says. “Given the robust recoveries of major trading partners, low global interest rates, and the prospect of another commodity supercycle, one would have expected growth rates to be 1.5 percentage points higher,” the report says.

In all countries except Brazil, the poverty rate, measured as the percentage of inhabitants living on US$5.50 (about R$30) or less per day, has reached its highest level in a decade, with an average of 26.4%. Brazil has implemented direct cash transfers for its most vulnerable population, containing poverty better than other countries.

In addition, Latin American children and youths have lost 1 and a half years of schooling, while the drop recorded in the UN’s Human Development Index (HDI) has surpassed that observed during the 2008 and 2009 global financial crisis.

The bank states that there are short and medium term risks for countries, among them the recurrence of Covid-19 outbreaks, which will hinder production. Also working against recovery are the tightening of liquidity in global financial markets in reation to inflation, growing public and private debt, and increasing government budget deficits.

The report states that, based on surveys conducted by the agency, between 40% and 60% of companies have deferred payment of their debts due to the drop in revenue caused by the pandemic.

THE PANDORA PAPERS EFFECT

Asked about the World Bank’s position on the Pandora Papers, an investigation by the International Consortium of Investigative Journalists (ICIJ) that brought to light fortunes hidden in offshore jurisdictions, Maloney implied that he expects the bank to provide further information on the matter. “Public information about the properties and holdings of public officials is a key tool to promote transparency and fight corruption,” Maloney said.

“We support this agenda of increasing transparency in the tax system, promoting the exchange of information between jurisdictions, improving international cooperation on the actions of institutions in which citizens have placed their trust. It is an extremely important agenda for us.”