Measuring three decades of development in Latin America

. Dec 15, 2020
human development latin america Human development has improved in Latin America, but not fast enough (Favela in Belo Horizonte). Photo: Fred Cardoso/Shutterstock

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Today, the history of human development in Latin America. The suspense over the coronavirus emergency salary. And new laws for Brazilian startups.

30 years of human development in Latin America 

The United Nations released its 2020 Human Development Report today. First created 30 years ago, the study changed the notion of development from a monetary-based notion of macroeconomic growth to a multidimensional measurement factoring in issues such as gender, inequality, and poverty. How did Latin America fare over these three decades?

</p> <ul><li><strong>Path towards middle income.</strong> Latin American nations experienced <a href="">tremendous improvement</a> between 1990 and 2020 —&nbsp;with dozens of them reaching the level of middle-income countries. However, this development has been slower than in parts of Africa and Asia. Moreover, there has been limited re-ordering in terms of cross-country rankings. Nations that were less developed 30 years ago continue to be left behind.</li><li><strong>Poverty levels go down but stay high.</strong> Known as the world&#8217;s most unequal region, Latin America did experience a sizable reduction of multidimensional poverty rates across the board. In some regions, however, these rates remain extremely high. That is the case for Haiti (40 percent), Bolivia (21 percent), and Honduras (19 percent).</li><li><strong>Education hurdles.</strong> Access to proper education remains a major bottleneck for Latin American development. In Brazil, the region&#8217;s richest nation, the problem is glaring and the country ranks below smaller economies such as Argentina, Uruguay, Mexico, Peru, and Colombia. And the Covid-19 pandemic is set to <a href="">make this problem worse</a>. A recent Unicef report showed that 4.8 million Brazilian students spent at least six months without access to any educational activities this year. These young people were mostly black or multiracial and lived in households with monthly incomes below USD 97.</li><li><strong>Environment issues loom.</strong> Rampant deforestation in Latin America has reduced biodiversity and increased poverty. In 2018 and 2019, Brazil and Bolivia experienced significant losses to their primary forests — the former due to logging and deforestation for new land use and agriculture, and the latter due to fires and large-scale agricultural activity. The region has also seen a greater incidence of extreme climate events which could lead to mass displacements over the next few decades.</li></ul> <figure class="wp-block-image size-large"><img loading="lazy" width="1908" height="1376" src="" alt="human development index" class="wp-image-54076"/></figure> <div class="flourish-embed flourish-bar-chart-race" data-src="visualisation/4670778"><script src=""></script></div> <p><strong>Uncertain future.</strong> The 2020 Human Development Report uses data from 2019, meaning that we will only be able to assess the damage caused by the coronavirus pandemic next year. But the trends are clear and uninspiring: income and gender inequality are on the rise, and poverty rates could see significant increases once governments run out of money to fund stimulus programs.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Could the emergency aid survive past 2020?</h2> <p>Senator Alessandro Vieira of Sergipe has presented a bill to extend the government&#8217;s <a href="">coronavirus emergency aid program</a> until March 31, 2021. His proposal would also prolong the current state of emergency approved by Congress early in the year, in order to allow the government to raise welfare spending without disrespecting budgetary laws.</p> <ul><li>The emergency aid began in March with monthly payments of BRL 600 (USD 116). Benefits were halved in September due to budgetary constraints and Mr. Vieira&#8217;s proposal would see additional payments continuing at this reduced level.</li></ul> <p><strong>Why it matters. </strong>The emergency aid has been Brazil&#8217;s biggest welfare program to date and helped lift tens of millions <a href="">out of poverty</a>. But its abrupt end could see these rates shoot back up instantly.</p> <ul><li>A survey by the National Confederation of Industry (CNI) shows that 49 percent of benefit recipients used the money to buy food products.</li><li>Official data shows that 8.6 million fell below the poverty line in October when the benefit was reduced, and 4 million people fell into extreme poverty. &#8220;The worst moment will be in January 2021, when the benefit ends,&#8221; said economist Daniel Duque, of think tank Fundação Getulio Vargas.</li><li>Meanwhile, the Central Bank&#8217;s Economic Activity Index — a predictor of official GDP performance — shows that the recovery from the Q2 plunge has slowed down. The index showed growth of 0.86 percent between September and October, the lowest since May.</li></ul> <p><strong>Holding back their wallets.</strong> Due to the uncertainty of Brazil&#8217;s economic future, 35 percent of all consumers intend on spending less money next year.&nbsp;</p> <p><strong>Investors react.</strong> The proposal to extend the emergency aid program was endorsed by the government&#8217;s whip in the Senate, raising fears among investors. The Brazilian Real fell on Monday, as did the benchmark index of the São Paulo stock exchange. Analysts believe that Brazil&#8217;s forex rate will hover around USD 1 : BRL 5 for at least <a href="">another year</a>.</p> <hr class="wp-block-separator"/> <h2>House passes new framework for startups</h2> <p>In a 361-66 vote, the House passed the core text of a new legal framework for Brazilian startups. The potential legislation would define startups as companies developing innovative products, services, or business models that are less than 10 years old and have annual gross revenue of no more than BRL 16 million (USD 3.13 million).</p> <ul><li>Startups will enjoy simpler processes to open and close companies. Meanwhile, angel investors and venture capital funds will be given more protection from startups&#8217; debts, as well as paying less tax(which <a href="">can reach 20 percent</a> in some cases).</li></ul> <p><strong>Rules of investment.</strong> It will be up to the Brazilian Securities Commission (CVM) to establish <a href="">easier requirements</a> for companies with yearly gross revenues lower than BRL 500 million to go public.</p> <ul><li>The CVM would also be responsible for defining rules on angel investments. Under the new law, contracts could be extended from five to seven years and would allow both parties to define a periodic payout for investors or the conversion of the investment into company equity.&nbsp;</li><li>There will be changes in startup investors’ tax rules, as well as protecting their net worth from startups’ debts.&nbsp;</li></ul> <p><strong>Why it matters.</strong> Brazil has been a hotbed for innovation in Latin America but hasn&#8217;t necessarily been the friendliest environment for startups.&nbsp;</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Vaccine.</strong> President Jair Bolsonaro said he would sign a decree today to free up federal funds for purchasing Covid-19 vaccines. However, he has prepared another decree making immunization non-mandatory and ordering every person to sign a waiver before taking the shot. That would make Brazil a global outlier, and experts fear it could spark <a href="">unfounded suspicions</a> over the vaccine&#8217;s reliability, thus undermining the vaccination effort. Moreover, Reuters <a href="">cites</a> a senior official at the country’s leading public biomedical institute who says nationwide immunization will only come in March and will rely on the success of the vaccine being developed by the University of Oxford and AstraZeneca.</li><li><strong>Biden.</strong> The U.S. Electoral College confirmed Joe Biden&#8217;s victory in the November 3 presidential election. At this point, President Jair Bolsonaro is the only G20 leader not to have congratulated Mr. Biden on his win.</li><li><strong>Agriculture.</strong> Despite worrisome droughts that are reducing yields and <a href="">putting farmers on alert mode</a>, the gross value of Brazil&#8217;s agricultural production could surpass BRL 1 trillion (USD 195 billion) in 2021, according to estimates by the Agriculture Ministry. &#8220;Corn and soybeans continue to grow, as well as cocoa, rice, wheat, beef, and pork,&#8221; said the government, in a statement.</li><li><strong>Supreme Court. </strong>In 24 hours, three separate Supreme Court decisions caused some <a href="">discomfort</a> to the Jair Bolsonaro administration and added a new chapter to the feud between the government and the judicial branch. On Sunday, Justice Ricardo Lewandowski gave the Health Ministry 48 hours to present clear dates for its Covid-19 vaccination plan — the deadline expires today. On Monday, Justice Edson Fachin suspended a decree lifting import taxes on firearms, and Justice Cármen Lúcia demanded explanations about accusations raised by the press that the Brazilian Intelligence Agency (Abin) is gathering information to assist the defense of Senator Flávio Bolsonaro, the president&#8217;s eldest son, who faces money-laundering accusations.</li><li><strong>Stocks. </strong>A survey carried out by B3 — the company that runs the São Paulo Stock Exchange — shows that the number of Brazilians investing in the stock market has jumped from just over 1 million to 3.2 million in the space of 18 months. The number of female investors rose by almost fivefold to 800,000. Moreover, Brazilian investors seem more aware of the risks posed by the stock market, being increasingly willing to learn the ropes from advisers and diversifying their portfolios.</li><li><strong>Recovery?</strong> One of the hardest-hit sectors by the pandemic, the food business is experiencing an uneven recovery of sorts. Boosted by consumption among young adults, bars and bakeries (which sell alcohol) posted better numbers in Q3 than restaurants. According to the Kantar Consumer Insights survey, they experienced a recovery of 58.7, 35.5, and 11.4 percent respectively. But with many cities rolling back their reopening process, the sector is set to enter 2021 facing huge uncertainties.

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