By: Staff Writer
October 28, 2022
The Economic Commission for Latin America and the Caribbean (ECLAC) said that extreme poverty in the Latin American and Caribbean (LAC) could reach nearly 14 percent in 2021.
The United Nations agency, in their “Towards transformation of the development model in Latin America and the Caribbean: production, inclusion and sustainability,” report also said that income inequality is increasing after the COVID-19 pandemic, however how to address the challenge is made problematic due to the macroeconomic constraints faced by governments coming out of the pandemic.
The report added: “The social situation in the region has also deteriorated, with considerable increases in poverty levels reflecting the effects of the pandemic and the ensuing economic contraction.
“Combating poverty and inequality requires more formal employment and social policies leading towards universal social protection systems. Both dimensions must recognize and attack other sources of inequality, such as those relating to gender, race or age and those stemming from environmental deterioration. Universal social protection is not only a moral imperative for development; it also contributes both to social justice and to economic growth and resilience: this is why the region must set about developing welfare states.”
The report also said: “Fiscal space must be expanded to ensure the sustainability of public spending and avoid unnecessary adjustments that could further deepen the economic slowdown and compromise the capacity to support the most vulnerable. To achieve this, short-term policy options are available that could increase fiscal revenue in the region through measures to reduce tax evasion, review tax expenditures to reduce forgone revenue and update tax codes with new good practices in international and digital economy taxation.
“Over the medium term, there is a need to consolidate personal income tax, extend the scope of wealth and property taxes, review and update the fiscal frameworks for the exploitation of non-renewable resources and consider environmental and public health taxes. Fiscal and social compacts that make tax regime reform in the region feasible are needed to drive this agenda forward.”
Inflation is also widening the gap of income inequality and despite the varied approaches to fiscal stimulus across the region, most of the countries have seen their fiscal situation deteriorate as a result of the major fiscal efforts made to combat the worst moments of the COVID-19 crisis and its social fallout.
In addition, in Caribbean countries in particular, “central government debt levels rose to 89.3 percent in 2020, then fell back slightly in 2021 to 88.1 percent. This high rate of indebtedness is particularly notable in six countries whose debt exceeds 90 percent of GDP,” the report said.
The way out of these dangerous economic times is through tourism and is an area of growing importance in many countries in the region is sustainable tourism for job creation.
Tourism is a key generator of foreign exchange, income and employment in Mexico and Central America (Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua and Panama), and in the Caribbean. The pandemic caused a prolonged suspension of tourism activities.
While some economies recovered rapidly, others continue to lag behind. The tourism sector must be rebuilt in a more inclusive, sustainable and resilient manner. It is necessary to increase investment in health, safety and risk management; work to provide favourable and inclusive labour, business and socioeconomic conditions; understand the increasingly important role of environmental sustainability; take advantage of the benefits of digitalization and foster cooperation between countries to ensure resilient responses to future crises.