'Crisis will be deeper and longer than expected' says regional economic commission

(CMC): The Economic Commission for Latin America and the Caribbean (ECLAC) says the region is not likely to see a return to pre-COVID-19 growth rates before 2025. 

Addressing a high-level virtual meeting, organised by the Association of American Chambers of Commerce in Latin America and the Caribbean (AACCLA),  ECLAC's executive secretary, Alicia Bárcena predicted that the crisis will be “longer and deeper than expected," and given the uncertainty COVID-19 has created “it will take several years to be able to recover." 

“If we consider the average rate of growth of the past decade, of 1.8 percent, regional GDP (gross domestic product) will only return to 2019 levels in 2025,” she said. 

She said the private sector, particularly chambers of commerce, and regional integration must play a “crucial role” in the region’s economic recovery from the COVID-19 pandemic. 

The meeting, entitled: “Forecast on Latin America and the Caribbean," formed part of the Annual Conference of AACCLA, which groups 23 American Chambers of Commerce (AmChams) and includes more than 20,000 companies representing more than 80 per cent of US investment in the region. 

Bárcena said the pandemic has revealed and amplified the region’s structural gaps, such as inequality and low productivity.

In order to cope with such effects, she said ECLAC has made a series of proposals for the short and medium term, including an emergency basic income (equivalent to one poverty line), an anti-hunger grant (for people living in extreme poverty), and a digital basket that would allow for bridging the gap of 40 million households in the region that do not have adequate connectivity.

Bárcena said ECLAC has proposed the deepening of regional integration and international cooperation since the fiscal efforts of national governments – which have invested four per cent of GDP on average to date and 10 per cent in credit guarantees for companies – “will not be enough.” 

“Globally, the pandemic is reinforcing two interrelated trends: the first is a shift towards less interdependence in production, trade and technology among the world’s major economies, particularly between the United States and Europe on the one hand, and China, on the other,” she said. 

“The second is that world trade is less open and more influenced by geopolitical and national security considerations, with more frequent disputes and with a weakened multilateral governance,” she added. 

COVID shows up intraregional gaps

The ECLAC head said the pandemic has also revealed the weakness of intraregional trade, which “will collapse” this year, reaching just 11 per cent, the same level seen in the 1980s. 

“We need to take advantage of this historic opportunity and truly position trade as a driver of growth – but a growth that has equality and sustainability at the centre,” Bárcena said. 

In this regard, she said it is necessary to put emphasis on trade facilitation, infrastructure and logistics, and to promote investment in dynamic sectors., such as renewable energy and the digital economy.

“The harmonisation and homologation of technical capabilities is (are) also necessary, especially in the free trade agreements already implemented in the area of the Pacific Alliance and in Central America with Mexico,” Bárcena said. “I believe we are ready to implement a major trade facilitation agreement and to move towards a regional digital market.” 

On digital matters, she underlined that the private sector must be included in order to close the big infrastructure gaps that still remain and that, for example, keep 32 million children in the region from being able to access tele-education. 

“We must effectively ensure access to digital technologies,” she said. “And that is why we have suggested a basic digital basket, which includes a cell phone, a laptop or a tablet and a broadband access plan that would enable digital access for all citizens," Bárcena said.

“This would cost one per cent of GDP. It is possible to do this, and we definitely need the private sector to join this initiative." 

She continued: “We need public policies, incentives and regulation to guarantee fair development and adoption of these technologies,” she continued. “The private sector will have a central role in this, especially chambers of commerce. We need a dialogue between the public and private sectors to achieve improved connectivity and digital accessibility.” 

Measures to stimulate job creation

Regarding the stimulation of job creation to reactivate production, income and consumption, ECLAC’s executive secretary noted that the organisation has proposed measures, such as co-financing the payrolls of the 2.6 million micro, small and medium-sized enterprises that have been affected by the crisis, through soft loans and extended grace periods for medium-sized companies, as well as bailouts for large companies on certain conditions, such as that they not use tax havens or redistribute earnings among shareholders. 

“We must also move towards universal social protection and protecting the most vulnerable groups, such as older people and women, who have been the most affected by the pandemic due to their extra burden of both paid and unpaid care work,” Bárcena said. 

“In addition, labour formalisation is one of the drivers of growth: we have 159 million informal workers in the region (54 per cent on average), so that they can access social protection and health programmes, which are urgent at this time,” she added, stressing that the crisis is hitting the most technologically-dynamic industrial sectors the hardest, “which serves to deepen the region’s structural problems.”

“This means that, unless appropriate policies are implemented to strengthen these industries, it is highly likely that a regressive structural change will ensue, leading to re-primarisation in the region’s economies,” she warned.

“Chambers of commerce and business associations have played a key role during the crisis. Businesses will also have a crucial role in the recovery process,” Bárcena continued. “That is why we must maintain a dialogue with the private sector to increase productivity, innovation and quality job creation. Moving, for example, towards clean renewable energy, the electrification of urban transport, investment in digitalisation and nature-based, agro-ecological solutions, and developing infrastructure and the adoption of new technologies with improved skills.”

She also said chambers of commerce can play “a key role” in moving towards the United Nations 2030 Agenda, the Sustainable Development Goals “and, thus, in recovering better, differently, in a world that is more sustainable and inclusive.” 

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