When the pandemic began, Latin America was already on its way to another lost decade, growing at a meager 0.3 percent a year between 2014 and 2019. In the first year of Covid, the region’s economy sank 6.7 percent and barely made it back to the surface in 2021 with a 6.8-percent recovery, according to data from the World Bank and the OECD.
With the slowdown in the U.S., China, and Europe shifting from a mounting risk to a baseline case in analysts’ calculations — some of them are even talking about the risk of stagflation, a ruinous mix of stagnant economic growth and soaring prices — projections for Latin America are gradually shrinking.
Regional growth is estimated to reach 2.5 percent this year and 1.9 percent in 2023 per the World Bank — a somewhat negative picture compared to the one painted in January, when the global lender projected 2.6 and 2.7 percent growth, respectively.
In addition to the social trauma of the pandemic, Latin America faces its biggest fiscal challenge since the public debt crisis of the early 1980s, when GDP fell by 6.1 percent.
While developed countries were sufficiently fiscally plump to delay the withdrawal of stimulus measures as much as possible and make an effort to put the supply-demand relationship back on track, emerging nations were forced to ratchet up interest rates to counter soaring prices.
Brazil, Chile, and Colombia were more aggressive in deploying mitigation measures, trying to guarantee liquidity in the financial market, credit in the real economy,...
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