A restaurant employee cleans a table last week in the center of Bogotá.JUAN BARRETO / AFP
In times of hyperbole and inflation of adjectives, the use of the term "historical" - positive or negative - should be limited to very specific events: reality has to sing a lot so that something can truly be seen as such.
This is, without a doubt, one of them: Latin American GDP will fall by an unprecedented 8.1% this year.
A gross figure, much, but also notably lower than it would have been if governments had not increased public spending to equally unprecedented levels to avoid greater evils: according to calculations published this Thursday by the International Monetary Fund (IMF), without this momentum the perimeter of the economic crater would have been almost twice as large, between six and seven percentage points more.
It is rightly said that emerging nations — and Latin America is an important part of that club — have much less room for maneuver in fiscal and monetary policy than their wealthy peers.
But, with few exceptions - Mexico is the most obvious - most of the region's countries, headed by Brazil, Chile, Peru and Argentina, have made the most of their capacity for action to mitigate a shock that did not enter into any Handbook.
Although the anti-crisis fiscal effort has been four points lower than the world average —eight percentage points of GDP compared to 12—, the results are beginning to be there: the recession will be enormous, yes, but without the whirlwind appeal to the markets it would border on what apocalyptic.
Brazil is for the IMF the clearest example that the increase in spending, especially in its social aspect, is paying off this year: without the emergency aid program for those who are experiencing the worst, the ratio of extreme poverty would have dropped. skyrocketed to nearly 15% of the population from 6.7% earlier in the pandemic.
Temporary basic income for 60 million people has successfully reversed this trend, and in what way: far from rising, extreme shortages have fallen to around 5.4%.
"These types of exceptional averages are playing an essential role in supporting economic activity to avoid an even more severe recession and greater social impact," say the technicians of the Washington-based agency in their review of the vital signs of the regional economy published this Thursday.
Monetary policy, also key
The news of this crisis does not come only from the fiscal flank.
Ultra-expansive monetary policy seemed, until just a few months ago, possible only for advanced economies, more stable, with inflation under control and which have been in favor of investors since time immemorial.
But the pandemic has shown that middle-income nations can also use this tool in times of maximum turbulence: most Latin American central banks have relaxed their monetary policy and injected significant amounts of liquidity since the health start, some of the main Economies in the area —Brazil, Mexico, Peru— have lowered interest rates by more than two percentage points and issuing institutes such as Colombia have crossed the Rubicon of QE with purchases of public and private debt.
"These programs have reduced the cost of issuance for governments and reduced stress on the markets," acknowledges the IMF.
At the equator of a new lost decade
Despite the actions of governments and central banks, the economic horizon of the region is more than bleak.
Unlike during the financial crisis of 2008 and 2009, which shook the United States and Europe but had little impact on the region - which was able to engage in the good performance of China and its voracious appetite for raw materials - this time the things are different: basic products have generally returned to pre-crisis values and remittances have held up better than expected, but tourism remains paralyzed, domestic consumption has been heavily affected and informal employment, which cushioned the blow in previous recessions, it has had the worst of it.
"Now domestic and external factors are moving in tandem, and the medium-term outlook points to a long recovery, with lasting costs," warn the Fund's economists, who do not believe that regional GDP will return to the pre-pandemic level Until 2023 at the earliest.
With the data in hand, the region is, once again, facing the eternal
déjà vu
of the lost decade: according to IMF calculations, per capita income will reach 2025 at the same level or even below the starting point of 2015 "This means that Latin America and the Caribbean are facing a new lost decade, as in the eighties," they outline from the multilateral. “Covid-19 will have a broad impact on employment and will erase part of the social progress achieved by the region up to 2015. Current estimates indicate lasting income losses, poverty will increase substantially and income inequality will worsen in Latin America and the Caribbean, which was already one of the highest in the world before the pandemic ”. Only public spending, which has downgraded the economic hurricane from a hecatomb to a horse crisis, and assistance programs will be able to “cushion the impact”.