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The Economy in the time of COVID-19 in Latin America
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The Economy in the time of COVID-19 in Latin America

The World Bank has just published its semi-annual report on Latin America and the Caribbean. The report seeks to assess how Latin America should respond to the health and the economic crisis in 2020, whether it should maintain or implement general or targeted measures to contain the COVID-19 surge, how deep will the recession be in Guatemala, Argentina, Mexico, Uruguay, Chile, Suriname and other 20 countries in the region and who should bear the losses that will stem from this economic calamity.

 

Its assessment of economic performance highlights that:

  • “The growth performance of the region had become lacklustre after the end of the Golden Decade, and the year 2019 had not been an exception in this respect. But after months of social unrest in many of the countries and a new oil shock, the Covid-19 epidemic and its impact on the world economy raise the prospect of a calamitous year for 2020.”

 

  • The bone-chilling perspective of 2020 GDP growth by country:

2020

Grenada

-7.3

St. Lucia

-7.2

Ecuador

-6.0

Mexico

-6.0

Argentina

-5.2

Brazil

-5.0

Peru

-4.7

El Salvador

-4.3

Nicaragua

-4.3

St. Vincent and the Grenadines

-4.0

Belize

-3.9

Haiti

-3.5

Bolivia

-3.4

Costa Rica

-3.3

Chile

-3.0

Dominica

-3.0

Jamaica

-2.9

Uruguay

-2.7

Honduras

-2.3

Colombia

-2.0

Panama

-2.0

Guatemala

-1.8

Paraguay

-1.2

Suriname

-0.7

 

 



  • “Because of the unusual depth and unprecedented characteristics of the ongoing economic crisis, real-time measures of economic activity are needed.”



    On health and economic costs it explains that:

    • Three areas may help understand and address the shock.
    • “Assessing the economic cost per life saved requires an estimate of the death toll Covid-19 would have imposed in the absence of containment measures. For example, the influential epidemiological study by the Imperial College in London predicted 2.2 million deaths in the US in the absence of decisive action to contain the epidemic. If 2 million deaths could be avoided thanks to containment measures, the economic cost would amount to less than USD 0.5 million per life saved (this is USD 1 trillion divided by 2 million). Given that the estimates for the statistical value of a life in the US fall in the range of USD 6-9 million, the cost of the containment measures adopted is totally justified.”
    • “Governments in developing countries could use similar back-of-the-envelope calculations to get a sense of the economic cost that could be justified in their case to contain the Covid-19 epidemic. The calculation would involve two key figures: the assessment of the number of deaths the epidemic would cause if left uncontained, and the value of statistical life used by agencies in charge of developing transport infrastructure, developing health and safety standards or setting environmental policy.”



    On addressing the economic crisis, it states that:

    • Moves to prevent a financial crisis, to protect jobs and to revitalize private investment, “will entail a change in the relationship between the public and the private sector, leading to a greater role of the state for possibly quite some time.”
    • “The process of acquiring and managing assets needs to be perceived as transparent and professional to maintain confidence in the government. This may also allow decision makers to take urgently needed measures without fearing prosecution in the future.”
    • “In the medium term, the priority has to be the divestiture of state assets to the private sector. Individual cases will need to be reviewed, and balance sheet repair solutions be designed. Benchmark-linked sales of government shares in companies will have to be arranged. While this is not an immediate priority, government should communicate clearly on the direction of travel, establishing a timeline and setting up sunset clauses wherever appropriate.



    Please read the full report below.

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