From now on it can only get better ¿Sí?

Five out of the top ten countries with active COVID-19 cases are from Latin-America. The still-developing region struggles with patient care and the risk of an economic disaster.

Latin-America is the teenager, depending on its parents, the United States and Europe, for continued economic growth. But what happens when those parents stop providing economic support?

Living in a developed country where the economy is strong and relatively independent is different than to live in countries from Latin America, which are still developing.

While countries in Europe are working to mitigate the economic impact.

The region became the centre of the pandemic while the UK was easing down restrictions. With an ongoing lockdown, the consequences could be devastating for the entire region.

Latin-America is facing a deep recession, said Paula Garda, OECD Economist, Chile/Colombia desk, “like never before this is aggravated by simultaneous health, economic, raw material and social price shocks, in unison throughout the region.”

The pandemic caught the world by surprise. When countries like Spain and Italy were on an orange alert, and the number of active cases grew, Latin-America was taking measures to prevent the virus. However, these measures were not enough.

The importance of prevention was due to the Social Determinants of Health, an indicator measured by the World Health Organization.

“The region faces its own challenges that aggravate the panorama: a limited fiscal space, less developed health and social security systems, large capital outflows, a large proportion of informal workers without any social protection, and great social discontent,” explained Garda.

According to the International Labor Organization, more than 53% of the labour force in Latin America is informal (non-contracted labour). “This means that if you worked and earned £10, that is all you get. But if you had a bad day and didn’t earn anything, then zero is with what you take home. It is a model on which you live day by day. When forced to lockdown, people will start to overlook the law, and go out to work to get what they need to survive” explained Melissa Russi, Economic and labour Sociologist.

The scenario has result in some people ignoring restrictions and some others losing their jobs. Companies, small and medium-sized, are not able to hold all the positions while not producing any income.

Governments without enough resources face a sudden poverty increase that will hit the economy for a long time.

Adding to that, the region had to adjust to what the world calls “the new normal”.

Working and studying from home was, for many, a silver lining. People had to learn how to balance it, some people struggled, but in the end, it became the new normal with a vast set of memes to lighten up the mood.

Migrating to online work and school was a possibility for some companies and education centres. Still, the fact that you can move your operations to an online environment is not a guarantee that your employees/students will be able to do the same. This is especially true in Latin America.

“Not everyone has access to a smartphone, a PC, a laptop, a high-speed internet connection, etc. But beyond the tools themselves, there is also a lack in education, a big percentage of people do not know how to use them and the digital platforms”, observed Russi, “now you have a person that has to sit the whole day in front of a computer and also needs to upgrade his internet connection to meet the requirement for his job”.

On June 19, the colombian government promoted a tax-free day in the hope it will help boost the economy. With massive amounts of shoppers standing in line and a crazy frenzy to acquire technological resources over other types of goods, international public opinion labelled that day as “COVID Friday”. The development of the day was highly criticized, due to lack of social distancing and what shoppers prioritized on that day, but Melissa Russi understands why it happened: “yes, it was a failure in some ways, but it was a response to the fact that now, inside a household one computer is not enough.” Printers, Wi-Fi modems to improve reach and speed connection, apps (like Office) and smartphones or tablets became a necessary good on the new normal.

What comes next?

The OECD has projected the GDP for 6 of the strongest economies in Latin America for 2020 and 2021. This table expresses in blue the result with only one outbreak and red in case of a second pandemic outbreak.

Numbers like these are discouraging. “In this context, the most affected are the most vulnerable, including informal workers, self-employed," said Garda "or those with temporary contracts, who are the first to lose their jobs and livelihoods. They usually have little access to employment opportunities or social protection and they have little savings to face the crisis. Many formal jobs that are being destroyed may not reappear quickly, and many workers have little chance but to become informal, with lasting scars on wages and productivity”.

It is essential to highlight that other sectors are struggling too and this could also hurt the region. Migrating to online environments for education broadens the education gap, which ultimately expands the non contracted labour force.

Educando from Worldfund referred to the education gap before the pandemic: “As a result, too many Latin-American youths entering the labour force lack the skills necessary to find dignified work and participate in an increasingly competitive, information-rich and globalized economy.”

The pandemic added a new challenge to overcome. For teachers and students, it was a process of simultaneously learning “how to”. “Some children don’t know how to use computers to the point of sending and receiving material, understanding new grading methods or developing every task online.” Russi pointed out “On the other hand there was not enough time to prepare teachers to change the program and adapt it online, there was no training. So, suppose on both fronts, you are facing these difficulties. In that case, it means this year the quality of education is going to be compromised. It is highly likely that when some students return to classes for the new academic year, won’t be at the expected level of attainment.”

Although these aspects paint a very unfortunate picture, Garda sees the pandemic as an opportunity for the region to improve once countries go back to normal; “education and training systems must be endowed with greater relevance and quality, as well as to implement measures to reduce the costs of hiring formal workers.”

Recovering from this might take many years unless action is taken soon. A possible solution would be to increase cooperation within the region. “The region now has the opportunity to deepen regional trade and implement reforms to diversify its export basket,” said Garda.

When facing similar circumstances on economies that are remarkably similar, working together and copying some aspects of the European Union model might be the key. International cooperation has never been so necessary. Although it might be natural for each country to protect its economy, Latin-America needs to work together with nations helping one another to overcome their difficulties. “In each country, it will be important to strike a balance between the needs for social spending and public investment and the need to ensure the sustainability of public accounts” assured Garda.

Globalization has made countries dependent on each other; countries that lack natural and primary resources rely on nations like Brazil, Mexico, Colombia, and Chile. Latin-America has multiple international commerce trade agreements with countries with strong economies. However, they have not yet, been able to take the final step and join the ranks of the developed nations.

The reason Latin-America is not a robust economy is that the region mainly exports products known as commodities. These products are non-industrialized products, like sugar, petroleum, flowers, vegetables and fruits. Products that do not go through an intensive transformation process, which means they are cheap products.

On the other hand, Latin-America imports manufactured goods. Fully transformed goods such as petroleum that has been refined into fuel, sugar cane that has been manufactured into powdered sugar or even coffee that has already been toasted and packaged. Also, machinery and technology needed to industrialize sectors. When the export-import process stops then the region has a disadvantage. “Yes, we have food, but we don’t have anything of the already processed final product that we consume, and we don’t have the resources to do it on our own” explained Russi.

Entering a lockdown is a wake-up call for every country. “Every country should have food sovereignty, being able to survive on their own. For Latin-America, this sovereignty means being able to control the mechanisms and policies of food production and distribution,” said Russi.

This window of opportunity for the region is quite small but promising. It might be the only way to overcome the financial crisis and avoid a significant setback on the developing growth of each nation. It is a moment to make public policies to secure the quality of life and hold the market.

Policies that prioritize the transition to informal to formal jobs, training to be able to accommodate online environments and invest in closing the inequality gaps in health care and access to education. Acting now might contain the disaster and may well mitigate any future lockdowns.