Welcome to “Number of the Week,” where we choose a single figure that helps understand what is going on in Brazil. This week’s number is the World Bank’s expected GDP growth rate for Latin America:
- growth in 2021
As the coronavirus spread around the world, Latin America quickly became the pandemic’s epicenter. Though the region is home to less than 10 percent of the global population, it has recorded nearly 20 percent of confirmed Covid-19 cases. Furthermore, low testing rates and the high prevalence of positive tests in numerous countries — notably Brazil and Mexico — suggest that the real health impact of the coronavirus in the region is significantly underreported.
According to the Economic Commission for Latin America and the Caribbean (ECLAC), the region’s GDP dropped 7.7 percent last year. Indeed, this skid would have been much more pronounced if it wasn’t for Brazil’s coronavirus emergency salary program, which prevented millions in the region’s largest economy from falling below the extreme poverty line.
For this year, the World Bank forecasts a bounceback of 3.7 percent — not nearly enough to recoup losses from last year. And 3.7 percent might be overly optimistic, unless Latin America manages to speed up its vaccination rollout. So far, Chile has been a positive outlier in a region which has struggled to secure supplies and get jabs in arms.
Here are some scenarios to keep an eye out for:
Cuba: Reforms and embargos. The island nation suffered an 11-percent GDP drop in 2020, but this was not entirely down to the pandemic. In his last months in the White House, former U.S. President Donald Trump ramped up sanctions on Cuba, overturning operating licenses of U.S. hotel chains working in the island, cutting fuel shipments, and forbidding visits from U.S. flights and cruises, typically filled with American tourist dollars.
- Cuba is continuously opening up its economy, with President Miguel Díaz-Canel announcing a currency reform in January to “end macroeconomic distortions.”
Argentina: Crisis on a loop. The country’s Central Bank measured a GDP contraction of 9.9 percent in 2020, marking the third straight year of recession in Argentina. While the country is expected to have a growth rate above 6 percent this year, it still has to tackle an inflation crisis which predates the pandemic.
- Argentina still owes USD 45 billion to the International Monetary Fund, and Vice President Cristina Kirchner said the country “doesn’t have the money to pay.” A wealth tax and soybean exports have helped to keep the country afloat, but the government is dangerously trying to artificially control prices. And that is a movie which rarely has a happy ending.
Peru: The curse of informality. Peru ended 2020 with the world’s highest per capita Covid-19 death rate. One of the reasons for this is that more than 71 percent of its workforce is in the informal sector, meaning they had no choice but to continue their jobs during lockdowns. The outcome is an economic slump of close to 14 percent. Growth of 8.1 percent is expected for 2021.
- Peru has earmarked USD 6.5 million for an aid program to support over 11,000 youngsters who became orphans during the Covid-19 pandemic.
- Political instability has also marred development — and citizens hope (but don’t necessarily believe) that the April 11 presidential election will bring some peace to the political field.
Central America: Multiple challenges for growth. Each country in the region has its own challenges and expectations for 2021. Last year, Caribbean countries had to battle the impact of a brutal hurricane season during the horrors of the coronavirus pandemic. Countries must speed up their vaccine programs to resume tourism activities, one of their main sources of income.
South America: Uncontrolled spread is a red flag. Economic recovery in South America relies on vaccination. But only Chile and Uruguay have performed well in this regard, while places such as Paraguay and Bolivia have yet to inoculate 1 percent of their populations.
- The surge of new coronavirus variants poses an additional challenge, forcing governments to reimpose lockdowns — which are painfully detrimental to the economy.