ECLAC's latest report for Latin America predicts a 9.1% drop in GDP and the closing of 2.7 million companies
The poor of the three main economies in Latin America will be left with the worst part of the economic disaster caused by the coronavirus pandemic. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) warned in its latest forecasts for the region that poverty will grow 10.8% in Argentina, 7.7% in Brazil and 7.6% in Mexico, figures up to three times higher than forecasts for the rest of the countries. The UN agency warned that economic activity is falling more than expected a few months ago, when the impact of the crisis resulting the covid-19 was not yet clear. In any case, 2020 will be devastated land for Latin America: GDP will fall 9.1%, there will be 45.4 million new poor, 8.5 million jobs will be lost in the next six months and 2.7 million companies will close the doors.
Economic projections for 2020 are unfounded. The fifth special report on the pandemic presented by ECLAC, entitled Facing the growing effects of covid-19 for a reactivation with equality: new projections, warns that the effects will be so devastating that the GDP per capita of Latin Americans will fall to 2010 values , which implies a 10-year decline in revenues. As the region is now at the epicenter of the pandemic, the situation could get even worse.
“Mexico's industrial production fell by 29.3% in April compared to the same month last year, while total economic activity in the same period decreased by 26.4% in Argentina, 15.1% in Brazil, 14, 1% in Chile, 20.1% in Colombia and 40.5% in Peru ”, states the ECLAC report. Based on these data, the agency projects, for the region as a whole, “an average drop in GDP of 9.1% in 2020, with reductions of 9.4% in South America, 8.4% in Central America and Mexico and 7.9% in the Caribbean ”.
The impact on the activity will be transferred to other indicators. "Now unemployment is expected to increase even more, which, in turn, will cause a significant deterioration in the levels of poverty and inequality," said ECLAC executive secretary Alicia Bárcena during the videoconference presentation Santiago. Argentina will be the most punished country in the region, with a 10.8% increase in the number of poor people compared to 2019. The country was already going through two years of recession and cessation of payments on its foreign debt when the virus appeared. It will be followed by Peru, with an increase of 9.3%, and by the two largest economies in the region: Brazil and Mexico. "In turn, extreme poverty would increase mainly in Brazil, Colombia, Ecuador, El Salvador, Mexico and Nicaragua," says ECLAC.
Meanwhile, unemployment will be around 13.5% at the end of the year, which represents an upward revision of two points in relation to the report presented by ECLAC in April and of 5.4 points compared to 2019. “With the new estimate ”, says ECLAC,“ the number of unemployed would reach 44.1 million people, which represents an increase of almost 18 million compared to the level of 2019. These numbers are significantly higher than those observed during the crisis financial crisis, when the unemployment rate increased 6.7% in 2008 to 7.3% in 2009. ”
The report highlights the importance of fiscal packages announced by different countries to offset the economic impact of the health emergency. But "as confinement extends, additional efforts are needed to satisfy basic needs and sustain household consumption," says ECLAC. It proposes, as an immediate action plan, a basic emergency income, a bonus against hunger and new initiatives to support companies and workers at risk. "For the implementation of any of these lines of action, it is necessary to strengthen the role of international financial institutions so that they can better support countries", asked Bárcena.