ECLAC calls for basic income for 214 million vulnerable people in Latin America

On Tuesday 12 May, the Economic Commission for Latin America and the Caribbean (ECLAC) presented the third special report on the COVID-19 pandemic and the economic and social effects this situation is having on the region. Under the title "The social challenge in times of COVID-19", ECLAC Executive Secretary Alicia Bárcena, from Santiago, Chile, presented the new document, which joins the other two already published by the United Nations regional commission. 

According to ECLAC, the impact of the pandemic on the region's economy has been due to both external factors (trade, tourism, etc.) and internal factors (unemployment, lack of demand, etc.), the combined effect of which will produce "the worst contraction the region has suffered since 1914 and 1930.

The forecast could not be more devastating for a region that was already in a situation of economic, political and social destabilisation. ECLAC estimates that the regional economy will suffer a 5.3% contraction, with a sharp rise in unemployment, which will have very negative effects on the population. As a result, the increase in poverty and extreme poverty makes the idea of a minimum vital income almost inevitable.

The social confinement and distancing measures, which have been necessary to curb the spread of the virus, have led to job losses (it is estimated that in 2020 there will be 11.6 million more unemployed than in 2019), which reduces labour income and therefore increases the situation of vulnerability, especially with regard to informal workers, who account for more than 40% and have no health or social protection.

Bárcena pointed out as one of the factors to be taken into account the fragility that the welfare states already faced in Latin American and Caribbean countries: "The pandemic has made visible structural problems of the economic model and the shortcomings of the social protection systems and welfare regimes that are proving very expensive today. For this reason, we must move towards the creation of a welfare state based on a new social pact that takes into account the fiscal, social and productive aspects," said the senior United Nations official.

That is why it is essential to build a welfare state and a universal social protection system in order to avoid a collapse like the one the region experienced in the 1980s. "It took the region 25 years to return to pre-crisis poverty levels, and it is likely that this crisis will mean a 13-year setback," said Bárcena.

In order to deal with the socio-economic impacts of the crisis, the Economic Commission calls on governments to guarantee immediate temporary cash transfers so that basic needs can be met and household consumption can be sustained. "Poverty in the region would reach 34.7% in 2020 if the announced measures are not implemented," said Bárcena. Translated into figures, poverty in the region will increase from 186 to 214 million people, and extreme poverty from 67 to 83 million.

For this reason, ECLAC is proposing the provision of an emergency basic income (IBE) equivalent to a poverty line (the cost of a basic basket of food and other basic needs) of US$143 for six months. This implies an additional expenditure of 2.1% of the region's gross domestic product.

Countries such as Argentina, which will see a 6.9% increase in poverty by 2019, as well as Mexico (5.9%) and Ecuador (5.1%), where the drop in migrant remittances, as is already being seen in other nations such as El Salvador and Guatemala, will further increase the crisis.

Likewise, if poverty increases, the same will happen with extreme poverty. Economic insecurity and loss of employment income will mean that the 10% of people who were in non-extreme poverty in 2019 (11.8 million) will see their situation deteriorate significantly by falling into extreme poverty. But there will also be a sharp deterioration in the position of people belonging to the middle sectors.

To address these figures on social benefits, Bárcena called for the creation of immediate space for short- and medium-term policies with the reduction of tax evasion and avoidance. "The amount of tax evasion is set at 6.3% of regional GDP," said the senior official, which is equivalent to three times the expenditure required to cover all the people who will be in poverty in 2020 for six months.

Groups that are particularly vulnerable to this crisis are women, people from low-income strata, informal workers, paid domestic workers, children and adolescents, young people, older people, indigenous peoples, people of African descent and people with disabilities. To help these groups, a total of 126 social protection measures have been implemented in 29 countries. These include cash and food transfers, which reach 90.5 million households, or 58 per cent of the regional population.

"To overcome the crisis, it is necessary to re-think the development model and consolidate the economic, social and environmental dimensions of sustainable development, without leaving anyone behind, as proposed in the Agenda 2030 for Sustainable Development and through a new social-fiscal covenant," reaffirmed the ECLAC Executive Secretary.  

The long-term strategic objective is a universal basic income that can include population strata that are highly vulnerable to poverty. One example would be Mexico's proposed minimum wage transfer of US$ 167 per month, which would be equivalent to 23.5% of GDP.