Brazil and Argentina accumulate the most public debt in the region

Latin American public debt reaches 79% of the region's GDP in 2020

photo_camera AP/FERNANDO LLANO - Shop advertising discounts in downtown Mexico City. Before the coronavirus pandemic, Mexico's economy was in recession, and this was only deepened by the economic shutdown triggered by measures to curb the spread of COVID-19

Due to the global pandemic, Latin America's public debt went from representing 68.9% of the region's GDP in 2019 to close 2020 with more than 10 percentage points, at 79.3%. Following the economic impact of COVID-19 that has been felt around the world, especially in this region.

The financial impact generated by COVID-19 led to increased public spending to cope with the needs of the population and the costs of the health crisis. This will trigger a slow economic recovery and influence the economic future of the region.

Public debt increased in Latam due to fiscal deficits in countries that have had to finance themselves with higher levels of indebtedness out of necessity. Juan Carlos Higueras, economic analyst and professor at EAE Business School, reported that "if we compare it with the increase in the advanced economies of the world, there is a difference in the magnitude, since, in these, the increase has been 20 percentage points, exceeding levels of 124% of GDP". 

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However, he adds that "the economies of Latin America are not as strong, so the effect could be much worse. According to the IMF, the fall in GDP in Latin America has been more than a trillion dollars, remaining at US$ 4.2 trillion in 2020, so the increase in public debt is around US$ 200,000 million, an important amount because it increases the per capita debt of Latin Americans and places the stock of debt at values above US$ 3.3 trillion".

The distribution of debt by Latin American countries is not homogeneous. South America is the most affected and its level of public debt increased from 70% in 2019 to more than 85% in 2020. This is a very significant increase as GDP in turn has fallen sharply.

It reports that the highest levels of public debt have been reached by Brazil and Argentina. It indicates that the former "exceeded 100% of its GDP, as it increased by 18% in 2020 and is equivalent to 140 billion dollars more, to 930 billion dollars. A sign of the sharp rise in public spending needed to mitigate the impact of the pandemic in addition to the logical delay in economic reform measures."

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As for the second, the country ended the year "with levels close to 97% of the value of its production of goods and services, with an increase of 4% over the year, to reach 336 billion dollars, although this poor increase is due to the debt renegotiation in September that led to a significant debt write-off".

The countries with intermediate levels of indebtedness are Colombia with 61.4%, Ecuador with 65.3% and Mexico with 52.4%. We see that all of them do not exceed 70% and all had levels slightly above 50% before the pandemic. 

As for Ecuador's situation, we find that it has reached close to 63.2 billion dollars which translates into an increase of around 6 billion compared to 2019 with 12 percentage points.

Finally, we find the group of countries that maintain, despite the economic crisis, lower levels of indebtedness, such as Chile, 32.8% of GDP, and Peru with 39.5%, although the latter country has experienced a large increase in 2020 of only 2.6 billion dollars compared to the previous year.

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