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78% of Latin American households cannot survive three months without income


A report by BBVA Research warns about the economic consequences of the pandemic among families with the greatest financial vulnerability

Neighbors of Quito, Ecuador, remove boxes with food provided by the government during the confinement decreed against the pandemic, on May 27, 2020 Dolores Ochoa / AP

The ravages of the pandemic hit the most vulnerable households particularly hard.

The fall in employment made it clear that the ability of families to meet their current expenses when they lose income depends on the economic development of the countries.

While almost 50% of households in the United States can last up to six months, the percentage drops to 5.5% in Ecuador and Paraguay;

7% in Argentina, Peru and Colombia;

and 14% in Brazil or Chile.

The data comes from the report

Household financial vulnerability to COVID-19: A global perspective

, developed by BBVA Research.

"In case of losing their main source of income, 78% of households, on average, would not cover their living costs for three months," warns the report, which does not take Venezuela into account.

“Among the certainties that we already have is that the confinements decreed in recent months have caused many people to lose their jobs or have to reduce their working hours.

This implies the disappearance or decrease of their income with the consequent impact on the economy and on the well-being of families ”, says the report, which analyzes“ what is the capacity of households to continue maintaining their level of current spending in the face of this loss from income".

The result, according to the researchers, will allow "addressing measures that help alleviate the deterioration in well-being or the widening of the inequality gap."

The concept that structures the report is “financial vulnerability”, that is, “the ability to face or not economic shocks depending solely on own resources”.

To measure it, it is estimated the time that a family that has lost its income can cover its expenses in food, electricity, water, education and health insurance without resorting to a credit or more extreme measures, such as a change of home.

The result of the investigation highlights the huge gap that the pandemic has exposed between developed and developing economies.

Countries such as the United States, Canada and Europeans have a high degree of financial resilience, meaning that almost four out of ten families can endure more than half a year without income.

If the period is shortened to three months, the average ratio increases to five out of ten.

In Spain, for example, two out of every three households can face a period of income drought for three months.

The situation changes dramatically in emerging countries, especially in Latin America.

“The data in the report suggest that there is a positive relationship between financial vulnerability and the country's economic development.

In the emerging countries of the study (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Russia and South Africa) just over 10% of the family units last for more than six months ”.

"The levels of financial resilience before the lockdown measures derived from the pandemic are, therefore, significantly lower in these economies," the report warns.

In addition, in general, after the gradual lack of focus in the region, a significant part of households have not recovered their level of income prior to the pandemic.

Microeconomic factors

The macroeconomic level of a household is not enough to measure its level of financial vulnerability.

The BBVA report also puts an eye on the microeconomic aspects that weigh down the chances of survival.

For example, "the characteristics that define the person who makes financial decisions at home, such as gender, educational level, age or employment status."

The research found factors that are repeated in those in charge of supporting the most vulnerable households, “such as being a woman, being very young or elderly, having a primary education level, or being unemployed or being part of the group of people inactive ”.

"Although these relationships are, in turn, conditioned by factors specific to each society," the researchers warn.

In all Latin American countries it is true that households headed by women exceed the average financial vulnerability, especially in Argentina, Brazil and Peru.

Only Paraguay escapes the norm.

The analysis was carried out from surveys carried out by different organizations under the guidelines of the Organization for Economic Cooperation and Development (OECD) to measure the education and financial capacities of the population.

The countries under study were Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Ecuador, the United States, Spain, Finland, Hong Kong, the Netherlands, Paraguay, Peru, the United Kingdom, Russia, and South Africa.

Source: elparis

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