ECLAC: Argentina, Brazil, and Mexico to Lead Regional Increase in Poverty Due to Covid-19

RIO DE JANEIRO, BRAZIL – The poor in Latin America’s three main economies will be the hardest hit by the economic disaster triggered by the coronavirus pandemic. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) warned in its latest projections for the region that poverty will grow by 10.8 percent in Argentina, 7.7 percent in Brazil, and 7.6 percent in Mexico, figures up to three times higher than for the remaining countries.

The UN agency cautioned that economic activity is declining more than expected a few months ago, when the impact of the crisis caused by Covid-19 was still unclear. In any case, 2020 will be devastating for Latin America: GDP will drop 9.1 percent, there will be 45.4 million newly impoverished people, 8.5 million jobs will be lost over the next six months, and 2.7 million companies will close their doors.

The economic projections for 2020 are bottomless. The fifth special report on the pandemic presented by the ECLAC, entitled ‘Addressing the Growing Impact of COVID-19 with a View to Reactivation With Equality: New Projections’, warns that the impact will be so devastating that the Latin American per capita GDP will shrink to 2010 figures, which implies a 10-year setback in revenue. As the region is now the epicenter of the pandemic, the situation could deteriorate further.

“Mexico’s industrial production fell 29.3 percent in April compared to the same month last year, while total economic activity in the same period decreased 26.4 percent in Argentina, 15.1 percent in Brazil, 14.1 percent in Chile, 20.1 percent in Colombia and 40.5 percent in Peru,” the ECLAC report said. Based on these data, the agency projects ” an average GDP drop of 9.1 percent in 2020 for the region as a whole, with declines of 9.4 percent in South America, 8.4 percent in Central America and Mexico, and 7.9 percent in the Caribbean”.

The impact on business activity will be shifted to other indicators. “Now an even greater increase in unemployment is expected, which in turn will cause a significant deterioration in the poverty and inequality levels,” said Alicia Bárcena, ECLAC’s executive secretary, during a videoconference presentation from Santiago, where the agency is based.

Argentina will be the most pummeled country in the region, with a 10.8 percent increase in the number of people living in poverty compared to 2019. The country was already suffering two years of recession and suspension of payments of its foreign debt when the virus emerged. It will be followed by Peru, with a 9.3 percent drop, and by the region’s two largest economies: Brazil and Mexico. “In turn, extreme poverty would increase mainly in Brazil, Colombia, Ecuador, El Salvador, Mexico, and Nicaragua,” says the ECLAC.

Meanwhile, unemployment will stand at around 13.5 percent by the end of the year, which represents a two-point upward revision from the report submitted by ECLAC in April and 5.4 points compared to 2019. “With the new estimate,” says ECLAC, “the number of unemployed would reach 44.1 million people, which represents an increase of almost 18 million over the 2019 level.”

“These figures are significantly higher than those observed during the global financial crisis, when the unemployment rate increased from 6.7 percent in 2008 to 7.3 percent in 2009.”

The report stresses the value of the fiscal packages announced by different countries to offset the economic impact of the health emergency. But “as confinement is extended, additional efforts are required to meet basic needs and sustain household consumption,” says ECLAC.

As an immediate action plan, it proposes a basic emergency income, a bonus against hunger, and new initiatives to support businesses and workers at risk. “For the implementation of any of these lines of action it will be necessary to strengthen the role of international financial institutions so that they can better assist countries,” Bárcena asked.

Source: El País

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