Empty shelves in a Peruvian supermarket. Photo: Jose Sotomayor Jimenez/Shutterstock
The International Monetary Fund (IMF) released a report predicting that the economic crisis caused by the Covid-19 pandemic is set to be the worst downturn since The Great Depression of 1929. Dubbing the coming recession “The Great Lockdown,” the fund forecasts it as being “much worse than the 2008–2009 financial crisis,” comparing it to the stock market crash of the late 1920s and 1930s which pushed U.S. unemployment to 23 percent.
As far as Brazil’s outlook is concerned, the IMF tips 2020 GDP contraction to reach an eye-watering 6.1 percent, which would be the worst annual result since 1901. With the ultra-liberal agenda of the Jair Bolsonaro government and his Economy Minister Paulo Guedes having struggled to spark significant gains in its first 12 months, the economy was already in a precarious position. The fund suggests The Great Lockdown will have a huge effect on the nation’s growth.
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was measured as potentially being twice as large as the global financial crisis of 2008–2009. Despite taking its time to reach Latin America — which enjoyed a commodity boom around the turn of the decade — the crisis battered the region’s biggest economies, with Brazil suffering its worst recession on record. </p>
<h2>The Great Lockdown around the world</h2>
<p>With all of the world’s developed and developing economies on high alert, the IMF projects that no major markets will make it through the crisis unscathed. Forecasting timid growth of 1.2 percent in China — which in itself could already be enough to spark a global recession — the IMF tips the U.S. GDP to fall by 5.9 percent, and Japan to drop 5.2 percent. </p>
<p>With Brazil set for its biggest downturn in almost 120 years, Mexico — the other major economy in Latin America — is facing the prospect of 6.6-percent contraction. With Washington D.C. having its own issues, Mexico’s President López Obrador and Jair Bolsoanro will face <a href="https://brazilian.report/power/2019/01/30/amlo-bolsonaro-mexico-brazil/">challenges</a> beyond the new <a href="https://brazilian.report/business/2019/11/12/usmca-could-brazil-benefit-from-trump-new-nafta/">trade deal between the U.S., Canada, and Mexico</a>. </p>
<p>In Argentina, the coronavirus pandemic has hit while the country was already on red alert. The country is already in recession, after GDP contraction of 2.2 percent in 2019 and a loan bill of USD 57 billion with the IMF. Though the fund <a href="https://brazilian.report/latin-america/2020/02/05/argentina-plan-climb-out-debt-sinkhole-imf/">plans to solve Argentina’s debt gradually</a>, meetings between the country and IMF director Kristalina Georgieva cease to be the priority. </p>
<p>Over in the Andes, the pandemic has snookered the political future of Chile. While the IMF tips the country’s economy to recede 4.5 percent due to The Great Lockdown, President Sebastián Piñera could see his neck saved by the government’s rapid response to the virus. In 2019, a <a href="https://brazilian.report/latin-america/2019/10/23/crisis-chile-repeat-2013-brazil-warning-future/">social crisis</a> almost saw the right-wing Mr. Piñera ousted, especially due to the state’s violent response to street protests. However, the Chilean government has seen its <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/04/05/poll-brazilians-want-jair-bolsonaro-resign-covid-19-crisis/">approval ratings rise</a> after the Covid-19 outbreak, and elections for a new Constituent Assembly have been put on hold.</p>
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<h2>A nightmarish prediction for Latin America </h2>
<p>According to economist and former Argentine Deputy Secretary of Industry and Commerce Miguel Ponce, the pandemic will throw the world into its biggest social-economic crisis ever, with no known precedent.</p>
<p>“We could say with all our heart that this is the worst crisis of capitalism in its entire history. Except for China, all the big countries will be in a weak condition. The unemployment rate worldwide is creating unprecedented situations,” he told <strong>The Brazilian Report</strong>.</p>
<p>Furthermore, it is important to note that the IMF’s apocalyptic predictions are based on an optimistic scenario of the virus’ spread. The fund also said that as soon as policy actions are taken around the globe, it could be possible to have effectiveness in “preventing widespread bankruptcies, extended job losses, and system-wide financial strains.” With that, the international community may rebound 5.8 percent in 2021.</p>
<p>This recovery, however, would only erase a fraction of the problem. The IMF states that “the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around USD 9 trillion, greater than the economies of Japan and Germany combined.”</p>
<p>“Until the storm has passed, we should leave small negotiations [such as Argentina’s IMF loan] for later times. First, the economies have to know <em>how much</em> and <em>what</em> are they going to lose,” the expert adds.
Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.
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Empty shelves in a Peruvian supermarket. Photo: Jose Sotomayor Jimenez/Shutterstock
