Latin America finds the keys to recovery after the COVID-19 crisis

The pandemic left a trail of crises at all levels. The ravages of COVID-19 took the form of economic collapse, a breakdown of global health systems and, as a result, profound social upheavals whose consequences are still latent and promise to set the agenda for the coming months. The virus has not differentiated between ethnicities, latitudes or religions, but it has done so between states, which are unequally protected in the face of this challenge.

The Development Bank of Latin America (CAF) organised on Tuesday, in collaboration with the OECD, ECLAC and the European Commission, a face-to-face event in Madrid dedicated to reviewing Latin America's economic outlook for 2021. The meeting was scheduled to present the fourteenth annual report drafted jointly by these organisations, which analyses the current state of Latin America and the challenges facing the region in the future.

The analysis, presented by the head for Latin America and the Caribbean of the OECD Development Centre, the Knowledge Manager and Director of Macroeconomic Studies of the CAF and the Associate Economist of ECLAC, addresses the structural and conjunctural problems that Latin America is going through and presents some functional responses for their resolution.

The 7% drop in GDP since 2020, with no signs of recovery to previous levels until 2024, the abundant underground economy and the proliferation of the informal market, which limit contributions, or the precariousness of social security systems, as well as the closure of 70% of schools, are some of the points to be resolved in all the countries of the region, in addition to the growing inequality gap as a consequence of the tax system and the production model.

The Director General of Casa de América, Enrique Ojeda, began his speech by highlighting the importance of the report, which is decisive in diagnosing the current state of Latin America and prescribing recommendations to channel economic recovery. He also expressed his gratitude for the institutional collaboration between the Ministry of Foreign Affairs, the Community of Madrid and the Mayor's Office of Madrid in setting up the meeting and underlined its historical and cultural ties with the region.

"The last LEO report was done in November 2020 in a virtual way," Ojeda stressed, "but this time we are facing a different context, a cautious and optimistic return to normality that we are all looking for". In this sense, this LEO sets the economic and social agenda for the region's development. It is necessary to "rethink the social contract in order to regain citizens' confidence in the institutions".

The Director General of Casa de América defined three transversal axes. Three axes that guide collective action: attention to climate change and the environmental crisis, digital transformation and the gender perspective. "Hopefully this is the opportunity to strengthen the region," Ojeda said.

The director of the Spanish Agency for International Development Cooperation (AECID), Antón Leis García, pointed out that this document is also "a call to action". According to Leis, the report outlines an accurate diagnosis "at a time of crisis for Latin America and the rest of the world, and with a road map for integrating the cooperation of other actors who, not from behind the wheel, but from the passenger seat, can help". This LEO is also a vindication of multilateralism.

The first panel included the participation of ECLAC's Deputy Executive Secretary, Mario Cimoli; the Deputy Director of the OECD Development Centre, Federico Bonaglia; CAF's representative in Europe, Jimena Durán Representante; and the Head of Unit of the European Commission's Directorate of International Partnerships, Jorge de la Caballería. A cast that sought to analyse the LEO and clarify some of the region's problems and challenges.

Cimoli spoke of the red lights blocking Latin America's recovery: informality, unemployment, the prices of raw materials, which prevent economic diversification, "and the issue of inflation, which seems to be a structural rather than a cyclical issue". Bonaglia called for a rethink of public spending and a reformulation of the social contract. Moderate spending and tax collection policies in order to be more effective.

Durán was critical of the lack of structural changes that have been carried out in all these months of the pandemic. The outlook is bleak," said the CAF representative in Europe, "but it is not all bad news, there is still time and opportunities to act". Jorge de la Caballería pointed out that we need "evidence and analysis" in order to act accordingly.

The former Minister of Foreign Affairs of the Spanish Government, Trinidad Jiménez, moderated the second and final panel, accompanied by the Director of the Carolina Foundation, José Antonio Sanahuja, and the Director of Oxfam's programme for Latin America and the Caribbean, Andrea Costafreda. Anna Terrón Cusi, Director of FIIAPP, and Manuel Escudero, Spanish Ambassador to the OECD and President of the Board of Directors of the Development Centre, closed the event.