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The COVID Reset Latin America Needs

The COVID-19 pandemic has done more than ravage Latin America’s economies; it has highlighted two pervasive and chronic structural weaknesses. Addressing them must be a key component of recovery efforts throughout the region.

BOGOTÁ/BUENOS AIRES/LONDON – The recession that Latin America is now confronting as a result of the COVID-19 pandemic is not a typical economic slump. This year, output across the region will be 10% lower than was forecast in late 2019, joblessness is in double digits, and nearly 15 million more people will now have to endure extreme poverty. Two decades of progress in reducing poverty and inequality are at risk. With living standards collapsing, the wave of social unrest experienced before the pandemic is likely to return.

During the initial phase of the COVID-19 crisis, most governments in the region made the preservation of lives and livelihoods their main priority. They plowed resources into the health sector, provided subsidies to businesses, and supplied households with emergency cash transfers. This was the correct approach, but, as economies gradually began to reopen, a shift in policies became necessary. Moving from economic preservation to recovery will bring new challenges.

The pandemic has highlighted two long-standing structural weaknesses in Latin America. The first is pervasive and chronic shortcomings in state capacity. It was not just a lack of fiscal resources, but also the lack of effectiveness in providing government support, that led to the sharp increase in the COVID-19 death toll across the region. Even today, classes and school activities remain suspended in many countries due to unresolved logistical problems. It is easy to imagine what will happen once a vaccine is available: Latin America will lag in the challenge of vaccinating the population at an adequate pace.

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