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Per capita income in Latin America will decline this year to 2009 levels


The OECD calls for closing the digital divide to ensure the bloc's economic future. Poverty will grow by 4.4 points and GDP will contract by 9% in a dismal 2020

Two health workers, in early August with neighbors from Villa Fiorito (Buenos Aires, Argentina) .AGUSTIN MARCARIAN / Reuters

The hands of the clock go back more than a decade.

The pandemic will return per capita income in Latin America to 2009 levels, according to calculations published this Thursday by the Organization for Economic Cooperation and Development (OECD), the United Nations, the regional development bank CAF and the European Union.

"The socio-economic consequences of the pandemic in the region are unprecedented," point out the technicians of the four organizations.

And, although they recognize at all times the “great heterogeneity” between countries, the blow is severe in all cases: on average, according to their projections, regional GDP will contract more than 9% in 2020 and the shortage will increase by up to in 4.4 percentage points.

The social impact will be uneven, much greater for the 40% of workers who do not have access to any form of aid or social protection mechanism, and for micro and small companies, "which lack the capacity to cushion the blow," say the study signatories According to their figures, up to 2.7 million companies are at risk of closing down in the coming months - most of them, the smallest and, therefore, with the least financial muscle -, which would mean the loss of 8.5 million jobs. "The new middle classes were vulnerable and the crisis is showing that it was not true that they could not return to poverty", remarks Mario Pezzini, director of the OECD Development Center, in conversation with EL COUNTRY.

Consumer and investor confidence will remain subdued until the pandemic is out of control.

"This will not only weigh down investment and aggregate demand in the short term, but will also limit potential growth in a medium horizon," warn the technicians of the OECD, the UN, CAF and the EU.

"And a slow recovery in employment can increase informality and poverty."

Almost six out of every 10 Latin American workers work in the informal market.

Product losses “could be permanent, risking another lost decade in terms of per capita income.” All in all, the many ills of today can — and “should” - “become an opportunity to redefine the social pact, turning the well-being in a central element, prioritizing stronger social protection systems, stronger and more inclusive public finances, as well as the need to implement inclusive and sustainable productive strategies ”.

Long before the average citizen knew what COVID-19 was, the situation of the Latin American economy pointed to a worrying sluggishness.

“Asia had maintained a growth trend and Africa, although somewhat less, also.

But Latin America had lagged behind in terms of development compared to the rest of the emerging countries, ”Pezzini says by phone.

"And the virus has aggravated everything, directly (confinements) and indirectly (lower external demand, the price of raw materials, remittances and tourism and increased capital outflows)."

Latin America did not take advantage of the boom in raw materials to change the production matrix and the decline in international demand has made it the block hardest hit by the pandemic.

“Industrial policy has been lacking and the arrival of foreign investment has not been taken advantage of.

Dependency has increased instead of increasing diversification, and now it is also paying for the low capacity of the public sector to intervene due to lack of tax collection ”, Pezzini points out, referring to two problems that economists of all walks of life have been pointing out for years but for which there are still no effective answers.

Digital divide

The confinements have blurred the lines between the physical and the virtual.

Activities that until a few months ago were done, fully or partially, face to face —education, work, shopping—, today are 100% online.

And this blurring between the two worlds is exacerbating the digital gaps between people, companies and countries: once again, the most vulnerable, who are also those with the worst access to digital channels, are left behind.

Despite the significant progress made in the last decade, only 68% of Latin Americans have access to the Internet, compared to 84% on average in rich countries.

And while the richest 20% of Latin Americans use the Internet in their day-to-day lives, only 37% of the poorest 20% do so.

That gap, of 40 percentage points, contrasts with less than 25 in the OECD as a whole.

“The coronavirus has made inclusive digital transformation a top priority to mitigate negative effects and accelerate inclusive economic recovery.

The need to adopt a digital transformation that is beneficial to all is one of the main lessons learned from this crisis, and it may be an opportunity for countries to give it the prominence it deserves in their digital agendas ”, reads the report.

The bloc as a whole also suffers in international comparison: “The countries of Latin America and the Caribbean have been characterized by a high and growing productivity gap compared to the developed economies.

And the digital revolution should be the driving force behind the increase in productivity, especially in the case of micro and small companies that are lagging behind, ”reads the study presented - also online - this Thursday.

"A productive transformation is essential and digitization is a key tool in that direction", Pezzini ditch. In what mirrors can Latin America look? What success stories can it take as a reference? The head of the OECD Development Center asked Two very clear come to mind, both in Asia: "South Korea and Vietnam." In both the difference is made by public policy. But first, the enormous digital gap that exists today must be reduced. "

Source: elparis

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