COVID-19: CAF analyzes public policies to address the crisis in Latin America

In order to present and analyze the measures adopted by the countries of the region within the framework of the COVID-19 pandemic, as well as the possible scenarios for Latin America, CAF - Latin American development bank - held a videoconference with the participation of the Ministers of Economy and Finance and members of the CAF Board of Directors, as well as special guests such as Augusto de la Torre, former Chief Economist for Latin America and the Caribbean at the World Bank, and Andrés Velasco, former Finance Minister of Chile and current Dean of the School of Public Policy at the London School of Economics.

The presentation reviewed how public policy efforts by Latin American governments have focused on protecting the spending capacity of families and keeping businesses afloat. In this regard, unprecedented measures have been announced to expand credit and transfer resources to businesses and households. In order to provide liquidity to maintain corporate payment chains, central banks have reduced interest rates and cut legal reserve requirements.

Similarly, the renegotiation of loans to businesses and households has been encouraged, without affecting the rating of debtors. On the fiscal side, guarantee programs have been created for corporate loans, particularly for SMEs. To serve households, unemployment insurance has been strengthened and existing programmes of social transfers, conditional transfers, bonds and food programmes have been expanded.

At the end of the event, CAF's Executive President Luis Carranza Ugarte, highlighted the main conclusions, stressing the importance of working on liquidity mechanisms that help preserve the health of the banking and business system. "In the midst of this unprecedented crisis for the world and for our region, it is necessary to adopt bold public policies, adapted to the reality of each country and well designed to help sustain the productive sector and employment, and especially to mitigate the impact on the most vulnerable social sectors. It is also of fundamental importance to promote a renewed process of international cooperation that makes possible the transfer of liquidity from developed to developing countries," said Carranza Ugarte. 

Since COVID-19 has been declared by the World Health Organization (WHO) as a Public Health Emergency of International Importance (PHEI), CAF has made available a series of tools such as a contingent credit line of up to USD 50 million per country for direct public health care systems; a rapid disbursement Emergency Credit Line of up to USD 2. 500 million that will allow the authorities to provide a rapid and timely response to mitigate the effects of the expansion of COVID-19, contribute to the continuity of business operations and the recovery of economic growth; and non-reimbursable cooperation resources for the donation of essential inputs and support to the health sector for USD 400,000 per country.