As Latin America and the Caribbean crossed Wednesday 1er April the bar of 20,000 reported cases of Covid-19, according to a count established by Agence France-Presse from information provided by governments and the World Health Organization (WHO) – a doubling in barely five days – fears of a global economic recession spread to the region, which already has 185 million poor people.
Alicia Barcena, executive secretary of the Economic Commission for Latin America and the Caribbean (Cepal), a UN agency, said in an interview with World from Santiago de Chile that the economic impact of the epidemic in the subcontinent is likely to be catastrophic, and calls for the lifting of sanctions against Cuba and Venezuela.
Before the health crisis, Cepal predicted growth of + 1.3% for the region in 2020. What will be the economic impact of the coronavirus pandemic?
The first estimates make us think that there will be a contraction of the regional economy of around – 1.8%. But this is only a first baseline study, depending on the situation facing the main trading partners of the region, i.e. China and Europe, and the effects that the contraction will have economy in these countries, to which the main Latin American export products leave. We have not yet taken into account the impact that the decline in activity in the United States will have. If we include it in the calculation, we think that this drop may be much more significant. Some private institutes like Goldman Sachs have estimated it at – 3.8%. We think it can easily reach – 3%.
Concretely, what will be the effects of this situation?
Our economies are very vulnerable to what is happening in the rest of the world. The coronavirus crisis will affect the region through five transmission channels: first, as we said, the contraction of activity in the countries that are economic partners of Latin America: exports could drop by – 10 , 7%, after a contraction of – 3%, already, in 2019. There is also the fall in the prices of basic products, such as oil or food, as well as the interruption of global value chains (all of the productive activities carried out by companies in different places around the world). This would mainly affect Mexico and Brazil, countries which import spare parts and intermediate goods from China. The crisis will also result in a drop in tourism demand, while many countries in the region depend on this industry, especially in the Caribbean. Finally, there is an intensification of the reluctance of investors due to the deterioration of global financial conditions.