How LATAM would cope with the Coronavirus recession

Latin America will have to focus on 'reviving' economic sectors that will be strongly impacted by the pandemic.

Bar graph with down arrow.

The pandemic has impacted sectors of the economy that will have to find a way to recover from the crisis. / Photo: LatinAmerican Post

LatinamericanPost| Jorge Herández

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Leer en español: Cómo afrontaría LATAM la recesión por el Coronavirus

Latin America will have to focus on 'reviving' economic sectors that will be strongly impacted by the pandemic: the low influx of tourists, especially in the Caribbean; the reduction in the value of raw materials such as copper, which plummeted to $ 2.16 a pound; the capital outflow in the region due to the financial catastrophe caused by Covid-19, among others.

In her opinion column, the Executive Secretary of the Economic Commission for Latin America and the Caribbean - ECLAC, Alicia Bárcena, assured that Covid-19 "broke into" a highly populated world (7.7 billion people), globalized and environmentally ill . The economic recession that the region will experience will be of great proportions, since the five main external channels of impact for LATAM and the Caribbean were directly affected.

"The decline in economic activity of our main trading partners, especially China; the drop in the price of our raw materials; the disruption of global and regional value chains; the sharp drop in the demand for tourism services; and an increase in risk aversion and worsening global financial conditions and capital outflows from the region, with the consequent devaluation of our currencies ”, is the diagnosis provided by Bárcena regarding the sectors that will suffer the most from the attacks of the pandemic.

While governments are fighting to prevent the spread of the virus and reduce the mortality rate from Covid-19, economic advisers do not welcome the total or partial paralysis of a country, since last year the region had a poor growth of 0.1 percent.

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End of shareholder capitalism?

The challenge that is coming is enormous and “forces to renew the toolbox. Each country will have to creatively explore and expand the framework of its response possibilities, recognizing that there are no known recipes, but also recognizing that there are some imperative steps, "said the Executive Secretary of ECLAC. Fiscal stimulus efforts to ensure health services, protect income and jobs in some countries, guarantee basic supplies for the population and guarantee access to the Coronavirus test, as well as provide funds to health systems have been successful measures not to paralyze the economy of each nation.

"Given the evidence of this crisis, the world community will have to confront the fact that globalization did not work as promised and that it must be reformed," emphasized Bárcena, who also stated that Latin America must move from shareholder capitalism to one of Stakeholders that are fairer and more inclusive. "Share capitalism, with its short-term view, has not taken into account the consequences of its financial objectives for workers, customers, suppliers, communities and the environment. The Davos 2020 Manifesto puts the benefit of the various interest groups at the center of the company's activity, and provides an alternative to shareholder and short-term capitalism, ”he said.

From ECLAC, Bárcena explained, the current debate offers a fundamental starting point to rethink the world economic system, starting as indicated in Davos with a change of perspective in the management style of companies, but also, as the economic debate suggests. , questioning the architecture of the system from its values to its regulatory component.

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For the official, the region needs equality and environmental sustainability that are the fundamental pillars for the new development model. Therefore, it is necessary to promote the creation of a corporate conscience with a collective vision, so that all participate fully in the construction of equality and a path of sustainable development, such as the use of lithium reserves in Argentina, Bolivia and Chile, to promote the generation and use of renewable energy. Bárcena's details echo more now, in the midst of the pandemic, when governments try to avoid the economic wreck.