By: Staff Writer
December 14, 2021
The Organisation for Economic Co-operation and Development (OECD) said that the Latin American and Caribbean (LAC) contracted by nearly 7 percent and won’t return to pre-pandemic levels until 2023/2024
The OECD, in their Latin American Economic Outlook, 2021, said: “In 2020, LAC experienced a historical economic downturn. Among the hardest hit by the pandemic, the region’s gross domestic product (GDP) contracted by almost 7.0 percent and its per capita level is not expected to return to pre‑crisis levels before 2023‑24. Moreover, growth and productivity growth are projected to decline, with an impact in terms of lower potential growth. The pace of recovery depends on the effective roll‑out of vaccines, a favourable international context and the course of the political cycle in the region.”
The report continued, “The impact of the COVID‑19 crisis has been asymmetric, particularly affecting the most vulnerable groups and reversing some of the region’s socio‑economic gains of recent decades. As a result of the crisis, the extreme poverty rate is estimated to have increased by more than one percentage point in 2020, reaching 12.5 percent of the population.
“Moreover, the poverty rate is estimated to have increased by three percentage points, reaching 33.7 percent. Poverty levels have not been so high for the past 20 and 12 years, respectively. Inequality, measured by the GINI coefficient, is estimated to have increased by 2.9 percent in the most unequal region in the world, as those most affected by job losses were in the first income quintile.”
Noting that most markets in the LAC are “informal” in any event, the report highlighted the need for more adaptive social safety net mechanisms and more inclusive social outreach programmes that reach the most vulnerable and underserved sections of the society.
The report advocated for a “new social contract” not just for LAC but for the world. It said: “Building consensus across citizens will be crucial to advance the ambitious reform agenda needed to drive the recovery. However, high levels of social discontent in LAC, demonstrated by the wave of protests across some countries of the region since 2019, present a significant challenge. The drivers of social dissatisfaction are multi‑dimensional and in large part explained by unmet aspirations for better jobs, quality public services and greater political representation. These expressions of social discontent highlight the need for LAC countries to renew their social contract to improve people’s well‑being and ensure citizen engagement.”
“In practice, renewing the social contract entails striking pacts in specific policy domains (e.g. the fiscal pact) and building broad support among stakeholders (e.g. government, civil society, trade unions and the private sector). The building blocks of a post‑pandemic social contract should revolve around two interconnected dimensions. First, it should be a transversal agreement across: i) socio‑economic groups, through an intersectional approach mindful of income, gender, ethnic and racial differences, among others; ii) territories, taking into account different local needs and opportunities and bridging territorial divides; and iii) generations, ensuring that policy decisions strike a balance between the interests of current and future generations, providing opportunities to the youth and building on the notion of intergenerational solidarity. Second, it should aim to achieve: i) resilient and sustainable productive strategies that prioritise the creation of quality jobs and embrace the green and digital transformation; ii) broader and more effective social protection systems; and iii) a more sustainable financing for development model. The intersection of these two dimensions shows how the social contract in each country is underpinned by concrete and specific pacts in various policy domains.
“An open and inclusive policy‑making process that incorporates and empowers citizens and local authorities can promote greater accountability and more effective implementation of pending policy reforms, while involving all relevant actors in the discussion. Understanding the political economy of reform is crucial to reaching stable and long‑lasting agreements or to revising them when necessary. An evaluation of the socio‑political context, clear communication strategies and compensation schemes to make reforms fairer by mitigating their potential adverse distributional impacts will be key.”
The report also called for greater regional cooperation and international integration for the region as keys to getting out of the worst economic pits of the pandemic. “Reinforcing partnerships that are grounded on shared values is necessary to support LAC countries in building new development models that place sustainability, resilience and well‑being at their core,” and “LAC countries should take more ambitious policy action to enhance workers’ skills, achieve productive transformation, upgrade the economic structure and attract sustainable investments. Productive policies should foster innovation, technological upgrading and the diversification of the productive structure in less resource‑intensive sectors by promoting greener investments, a circular economy and the adoption of new technologies,” with the latter calling for “urgent” action on policy initiatives that bolster trade and create a regional value chain for greater economic support.