Latin America has suffered the largest economic downturn in 120 years

The corona pandemic is hitting Latin America hard. This year economic output will decline more sharply than ever before. Poverty, on the other hand, is increasing – it is a lost decade for the continent.

A market in Lima, Peru.  The ordinary population is particularly hard hit by the pandemic.

Dhe economy in Latin America is experiencing the biggest economic slump in at least 120 years this year. According to the Economic Commission for Latin America and the Caribbean (Cepal), the gross domestic product will fall by an average of 9.1 percent this year, as sharply as it has not since the start of data collection in 1900. This will increase poverty and return to 2006 levels. The main cause is the consequences of the corona pandemic. The result: a lost decade for the continent.

The importance of these numbers should not be underestimated: ten elections will be held on the continent over the next 15 months, including three presidential elections and a referendum in Chile, which precedes social unrest. Many traditional parties were already weakened before the corona pandemic.

By far the largest economic downturn was recorded this year in Venezuela. The GDP of the country ruled by the socialist ruler Nicolás Maduro will decline by 26 percent, according to the Cepal report that has now been published. It is followed by Peru (excluding the Caribbean region) with a decline of 13 percent. Argentina (-10.5 percent) and Brazil (-9.4 percent) ranked third and fourth. Major economies such as Mexico and Chile have to reckon with a decline of nine and 7.9 percent respectively.

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Many countries lack a good health system. In addition, there is a high proportion of informal employees in some countries. You have been and will be hit particularly hard by the restrictions of everyday life. The pandemic has hit hard in Latin America: Peru had the most Covid-19 deaths per capita internationally at the beginning of September. Brazil, whose President Jair Bolsonaro played down the pandemic from the start, has long been in the top group of countries with the most (cumulative) cases of infection.

Latin America, writes Cepal in its report, must seize the moment to reorient itself in order to meet the development goals of the 2030 Agenda. The starting conditions at the beginning of this decade are now extremely bad: According to the Economic Commission, the unemployment rate will rise this year by 5.4 points to 13.5 percent, the poverty rate will reach 37.7 percent – an increase of 7.1 percentage points.

The pandemic is primarily affecting countries that are already poor. Countries like Haiti, El Salvador, and Honduras, for example, are heavily dependent on the money that emigrants from the United States send them. Money that is now breaking away to a not inconsiderable extent.

Cemetery of New Hope: The corona dead are buried in a huge cemetery field on the outskirts of Lima.
Cemetery of New Hope: The corona dead are buried in a huge cemetery field on the outskirts of Lima.: Build: AP

In the years 2014 to 2019, economic growth in the world region was only 0.4 percent on average. There are many indications that there is hardly any improvement in sight in the near future. “This is, without a doubt, the worst economic and social crisis that the region has experienced in decades,” writes Cepal in its report. It reveals the weakness of the economy, which is on shaky feet. “The pandemic hit the region with a combination of internal and external shocks.”

There are also problems that existed before the pandemic. There were unrest not only in Chile last year, but also in Bolivia, which will elect a new president in October. In Venezuela, a new parliament is to be elected in December, although the opposition will (at least to a large extent) boycott the polls. In Mexico, on the other hand, Andrés Manuel López Obrador is headed by a president who downplayed the pandemic similar to Bolsonaro. The next few months could be even more difficult than before for some countries in the region.

There are hardly any positive exceptions. One example would be Uruguay, which has so far managed the pandemic well and whose GDP is only falling by 5 percent. Further north is the only country in the region that showed economic growth during the pandemic: Guyana, one of the poorest countries in the Caribbean. The small country’s GDP will grow by 44.3 percent. The reason: oil deposits have been discovered off the coast of Guyana. Who will actually receive the cash blessing is a question.