Latin America and the outbreak of Covid-19: a chronicle of multiple crises (II)


This is the second in a series of articles on the outbreak of Covid-19 and the impact on Latin America. In the first article we explored the underlying factors of the health emergency, including the austerity policies and increased role of the private sector, through health public-private partnerships (PPPs).

By María José Romero (Eurodad), Jasmine Gideon (Birkbeck, University of London), Patricia Miranda and Verónica Serafini (LATINDADD).

In this second article we look at the likelihood of an economic crisis and at the very negative impacts on the poor and most vulnerable, particularly women. These have happened mainly as a result of both the measures enacted to respond to the pandemic and prevent its spread, and the situation facing the developed world. We also look at the way forward for the region and the world.

The economic and social impacts of Covid-19 – Counting the cost

In most countries across the region, containment efforts have meant border closures, school closures and the closure of shops and restaurants to ensure social distancing. These measures are already impacting negatively in terms of service sector activity. Even though many governments are putting in place emergency economic packages, this situation will constrain public finances and increase already high debt levels, with a detrimental impact in the medium and longer term on the most vulnerable.

According to the UN Regional Commission for Latin America (ECLAC), debt climbed from an average of 39.4 per cent in 2017 to 42.3 per cent of GDP in 2018. In Argentina, there is an exceptionally worrying situation that has seen debt levels jump by more than 38 percentage points over this period.

There are different channels of impacts, and some of them are sub-regional or country-specific, for instance, trade and tourism. In some cases, the negative impacts of measures enacted to contain the local outbreak come on top of the negative consequences of external factors. For instance, the sharp fall in the oil price benefits the oil importing countries in the region, but hits countries that are dependent on oil exports. The lower export volumes – given the measures enacted in China, Europe and the US – drains revenue from international trade, while many countries will be negatively impacted by lower tourism demand as a result of border closures.

It is not known how long national economies will take to recover. What is clear, however, is that the economic crisis can result in an unprecedented decrease in revenues of many infrastructure projects implemented through public-private partnership contracts around the world, such as airports and roads. As many Latin American countries have PPPs in the infrastructure sector, the economic crisis could trigger public guarantees to offset the losses incurred by private firms. This would result in a negative fiscal impact on the public purse, and hence on citizens.

The outbreak of Covid-19 is also likely to expose major social challenges. One of them is the negative impacts of self-isolation, mainly in terms of the precarity of work. For instance, in Peru 73 per cent of employed work is in informal conditions, which means no social security or labour rights.

Similarly in Bolivia, where around 80 per cent of the population are self-employed or work as street vendors, many will have to continue to work despite the quarantine. Furthermore, while both women and men are informally employed, there is evidence that women are more likely than men to be informally employed and thus less likely to be entitled to any available social security benefits.

It is clear that for many people across the continent working from home practices are not an option, which can also have a negative impact in terms of the spread of the virus. In cases where confinement is possible, it is critical to ensure that this will not increase the already high rate of domestic violence against women as they are forced to live 24 hours a day with their aggressor. Mexican research reveals how during periods of tension (such as during the World Cup or election years) or when families spend extended periods of time together such as over religious festivals, domestic violence and femicide rates notably increase. This concern is therefore very real.

Furthermore, the social impacts of Covid-19 are likely to be highly gendered. Data from across the region shows that women already spend more hours per day combining paid work with unpaid care work and this is likely to increase in the context of Covid-19, making women even more vulnerable to burnout and poor health. Indeed, the indirect costs of poor health on households are often greater when women become ill rather than men, given women’s role as the primary carer within the household. What this means in the context of Covid-19 is obviously a cause for concern as the indirect costs are often most stark for lower income households. This is a situation that must be addressed now.

How can these multiple crises be addressed?

The outbreak of Covid-19 shows that it is important to look at the broader social determinants of health. Given the fragility in Latin America, this is the crux of the problem rather than solely focusing on the health sector. It also shows the critical need of having strong public health systems, with adequate financial and human resources that allow an efficient and equitable response, and strong states that protect citizens against the multiple crises they face.

We are calling on international financial institutions to play an important role in responding to these multiple crises with a people-centred approach. In the short and medium term, they will have to provide unconditional concessional finance to support health systems to respond to the health crisis. This could be used according to countries’ needs, including to hire extra staff, buy tests and protection supplies, but also to mitigate the economic impact of the global and local outbreak of Covid-19.

It will also be important to end austerity policies and to avoid supporting market-based solutions for healthcare as these will risk increasing existing inequalities. The experience shows that PPPs are a risky business, and should not be prioritised to finance public services. In some cases, debt relief will be critical to help free up countries’ resources for crisis prevention and response. In the longer term, strengthening health systems has to be a priority to help countries meet their UHC objectives.

This is a situation of extraordinary proportions. It demands action from world leaders now.

The authors would like to thank Camila Gianella Malca, from Pontifical Catholic University of Peru, for her valuable comments and inputs into these articles.