ECLAC’s new annual report warns that the crisis has exacerbated the region’s structural problems, predicts a deceleration for next year and asserts that to support inclusive, dynamic and sustainable growth, more investment and jobs are needed. required.
Latin America and the Caribbean will experience growth in 2021, although the pandemic remains present and the crisis has exacerbated the region’s long-standing structural problems: low investment and productivity, informal work, unemployment, inequality and poverty. This is why the recovery of investment and jobs, especially in environmentally friendly sectors, is the key to a transformative and inclusive recovery, the Economic Commission for Latin America said this week. and the Caribbean (ECLAC) by presenting a new edition of one of its most important reports.
The organization’s Executive Secretary Alicia Bárcena unveiled the Economic Survey of Latin America and the Caribbean 2021: Labor Dynamics and Employment Policies for a Sustainable and Inclusive Recovery Beyond the COVID Crisis -19, in which ECLAC updated its regional growth projection for this year to 5.9% and warned that the region will experience a deceleration in 2022, with an estimated expansion of 2.9%.
Growth in 2021 is mainly attributable to the weak base of comparison – after the 6.8% contraction recorded in 2020 – as well as the positive effects induced by external demand and the rise in the price of raw materials that the region exports, as well as increases in aggregate demand.
“There are significant asymmetries between developed and middle-income countries, which includes the majority of countries in Latin America and the Caribbean, both in the dynamics of immunization and in the capacity to deliver. economic stimulus policies, ”Alicia Bárcena declared.
“In order to maintain expansionary fiscal and monetary policies, countries in the region must supplement domestic resources with greater access to international liquidity and through multilateral mechanisms that would facilitate debt management, if necessary. Multilateral initiatives are needed to address uncertainties about immunization and developing countries’ access to financing under adequate conditions, ”added the senior United Nations official.
The annual report shows that the structural problems that have limited the region’s economic growth for decades have been exacerbated by the pandemic and will limit the resumption of economic activity. Before COVID-19, the region was already on the path to stagnation: over the six-year period between 2014 and 2019, it grew at an average rate of 0.3%, below the period average of six years which includes the First World. War (0.9%) and the Great Depression (1.3%). In addition, it has seen a steady decline in investment, reaching one of its lowest levels for the past three decades in 2020 (17.9% of GDP). Likewise, labor productivity decreases significantly.
In addition, in 2020, the pandemic triggered the biggest crisis that labor markets in Latin America and the Caribbean have experienced since 1950. Globally, the region’s labor markets have been most affected by the crisis. caused by COVID-19 – with the number of 9.0% in 2020 – and the recovery expected for 2021 will not be enough to return to pre-crisis levels.
The pandemic has also led to a sharp decline in labor market participation, especially among women. With the crisis, the participation of women reached 46.9% in 2020, which represents a decline from the levels observed in 2002. In 2021, this indicator should recover to reach an estimated 49.1%, but this would not be expected. still only similar to 2008 levels.
The economic study underlines that ECLAC has proposed to channel investments towards sectors which would promote a new development model and which can stimulate competitiveness and employment, and reduce the environmental footprint. These include: the transition to renewable energies; sustainable mobility in cities; the digital revolution, to universalize access to technology; the healthcare manufacturing industry; the bioeconomy and ecosystem services; the care economy; the circular economy; and sustainable tourism.
“To boost employment, productive and labor policies will be needed to promote professional integration, especially among women and young people,” said Alicia Bárcena. She added that countries should expand programs that promote employment, especially among women and youth; spearhead sectoral policies to reactivate productive activities hard hit by the crisis, such as trade and tourism; expand and deepen support programs for micro, small and medium-sized enterprises (MSMEs); and strengthen the healthcare economy.
Regarding tax issues, the report stresses that tax policy should accelerate public investment and incentivize and attract private investment. To sustain fiscal policy, it is a priority to strengthen tax revenue and reduce tax evasion, since it represents approximately $ 325 billion (or 6.1% of regional GDP).
In this area, better access to international liquidity and to multilateral mechanisms that would facilitate debt management would help broaden the region’s fiscal and monetary leeway. The recently implemented issuance of Special Drawing Rights (SDRs) equivalent to $ 650 billion will strengthen the external position of countries in the region, reduce risks and free up resources to meet the Sustainable Development Goals ( ODD). But the issuance of SDRs and their reallocation is not a panacea and must be accompanied by other initiatives, including the creation of multilateral funds such as the Fund to Alleviate COVID-19 Economics (FACE), proposed by Costa Rica, to facilitate access to finance. .
The report stresses the need to strengthen regional, sub-regional and national development banks with the aim of increasing lending capacity and the capacity to respond to the pandemic, and to establish a multilateral mechanism for restructuring sovereign debt. to manage the obligations contracted with private creditors. He also mentions the importance of reducing the procyclical inclination of rating agencies and of helping financial stability to become a global public good, through the creation of a multilateral rating agency.
“We need to broaden the toolbox of innovative instruments to improve access to finance and include middle-income countries in all initiatives involving debt relief and access to concessional liquidity. GDP should not be the only criterion for evaluating the level of development and the needs of countries. We have to move from one diploma to another, ”stressed Bárcena.