The scenes from the edges of a failing continent is truly devastating: the pandemic that has wreaked havoc in Asia and North America is literally destroying the fundamentals of Latin America.
Combined with inane political leadership, lackluster disease control infrastructure and a seasonal climate for the spread of a pandemic, almost every country in South America is filled with corpses on the streets, with hospitals in total shambles. However, the pandemic is just a start, according to financial and economic experts, as these states now face mounting debts, insoluble social and economic inequality. These experts now warn that the region is in for a chaos, one that would totally change the atmosphere in the continent, totally changing the climate.
The Latin American economy, in totality, should shrink 10% this year, according to the International Monetary Fund’s projections, a most devastating analysis.
The IMF said the “pandemic’s still rapid spread indicates that social distancing measures will need to remain in place for a longer time, depressing economic activity in the second half of 2020.” A UN report has gone on to say that “the worst economic and social crisis in decades, with highly damaging effects on employment, the fight against poverty and the reduction of inequality.
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The disaster was already there to sprout for the right amount of chaos: The economic growth in this region spanning from 2014 and 2019 averaged just 0.
4% annually, the lowest since the 1950s. The Organization for Economic Cooperation and Development called the Latin American middle class to have found themselves in “a vicious cycle of low-quality jobs, poor social protection and volatile income that leaves them at risk of falling back into poverty.
” One in five of those aged 14-25 is currently unemployed, even with the will to search for jobs.
“Latin America came into 2020 like a plane flying with one damaged engine,” says Eric Parrado, Principal Economist at the Research Department of the Inter-American Development Bank (IDB). “Then the other one was damaged. Now we are looking for somewhere to land to save the plane and its passengers.”
Parrado has identified three “sudden stops”, which will potentially send the region in the throes of a triple heart attack, potentially destabilizing the region impermanently:
First of all, Parrado says that capital is, and will, drain continuously from the markets in the region.
Investors, already stricken with panic with the instability throughout, will now desert their “risk-prone” equities and bonds. Remittances, money from the outside that Caribbean nations depend on for their GDP, is also forecast to fall back in kind.
In regards to the status of trade, Parrado paints a darker picture: import and export is falling “very rapidly.” Latin America is very dependent on exporting commodities from soybeans to copper and oil. The global demand for such produce declining, it is a matter of time before they take the huge fall.
Finally, the lockdown all around the world, with their wary eyes on the never-ending health crises in the continent, will restrict mobility in the region. Central America is heavily dependent on tourism for their economy.
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