Updated 4 May 2020

LAC country governments have reacted swiftly and preventatively to protect their citizens and contain COVID-19’s spread, which is likely to face its most difficult period in the region during the first weeks of May. Such a preventative reaction is very important due to a number of particular regional challenges that LAC countries face in response to this pandemic, such as less equipped healthcare systems and fragmented social safety nets. Yet, the region is already facing an economic crisis with less fiscal space than in 2008 to mitigate the deeper recession that will result. Focusing on the 15 countries that are a part of the Steering Group of the OECD LAC Regional Programme, this note provides an overview of the measures being enacted to mitigate the public health situation, including its social, economic, and governance dimensions.

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Overview

The COVID-19 outbreak started in the region on 26 February, when Brazil confirmed a case in São Paulo, many other imported cases started appearing in other countries in the subsequent weeks. Since then, there have been at least 251,387 confirmed cases and 13,365 deaths.1 Despite this relatively lower level of outbreak in comparison to the United States, Europe and Asia, LAC country governments have largely reacted swiftly and preventatively, taking an array of measures to protect their citizens and contain COVID-19’s spread. This preventative reaction is in large part due to a number of particular regional challenges that LAC countries face in response to this pandemic, such as, for example, less expansive and sophisticated healthcare systems and social safety nets. As the LAC region is large, totalling 30+ countries, this note will focus on the 15 LAC countries that are a part of the Steering Group of the OECD LAC Regional Programme.2

Most first cases in the region over late Feb.-early March were linked to travellers returning/coming from Europe, Asia or the United States. In response, the majority of the 15 countries covered within this note3 closed all of their borders, generally with exclusions for returning citizens and residents, during the month of March. In addition, all countries have implemented measures to close public spaces and limit social gatherings, with over half of the countries putting in place stricter national measures such as curfews4 and/or quarantine orders to “take shelter at home”5 (see Annex 1 for more information). Despite these measures, the number of confirmed cases are on the rise for all countries (see Figure 1).

Aside from the health risks, a significant socio-economic impact is expected in a region that was already facing difficulties (UN-ECLAC, 2020[1]). Latin America is highly dependent on China’s economy, and the region will feel the crisis even more as the effects of the virus on the US economy increase. Furthermore, in a perfect economic storm, dropping oil, metal and minerals prices have resulted in plunging Latin American markets and currencies (Horwitz et al., 2020[2]). Many LAC countries also have large tourism sectors, which will suffer greatly, as well as services, SMEs and commodity exports. Prior to the epidemic, the IMF had predicted 1.6% GDP growth for the region for 2020. Since then, external and domestic conditions have worsened and through a combination of different channels, the region will contract in 2020; the magnitude of this effect will depend on the depth and length of COVID-19.6

If for developed countries the health and economic impacts of this pandemic are already very significant, the LAC region faces an additional set of challenges. The more policy-makers want to contain the virus, the more they will need to lock down the country and the more fiscal space will be required to mitigate the deeper recession that will result (Hausmann, 2020[3]). Yet, most LAC countries lack fiscal space even in the best of times. In addition, the formal/informal duality of the economy and society risks exacerbating inequalities and social discontent.

Focusing on the 15 aforementioned LAC countries that are a part of the Steering Group of the OECD LAC Regional Programme, this note will give an overview of the measures currently being enacted to mitigate the public health situation in different countries of the region, including its social, economic, and governance dimensions.

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Figure 1. COVID-19 crisis in Latin America and the Caribbean
Figure 1. COVID-19 crisis in Latin America and the Caribbean

Source: Based on national official numbers gathered by the OECD Secretariat, as of 3 May 2020.

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Combatting COVID-19 in LAC: Health considerations

As of 21 April, more than half of the 15 LAC countries covered in this note had been classified as Category 4 status by the WHO, denoting “community transmission” of the virus.7 Currently, the most affected countries are Brazil, Chile, Peru, Ecuador and Mexico. Brazil also currently has the highest growth rate of cases in the region. 

The Pan-American Health Organization (PAHO), the WHO’s Americas branch, is providing technical co-operation, working with LAC health ministries and has launched an USD 94.8 million Appeal to donors & partners to scale-up the capacity of the countries of the Americas to respond to COVID-19. The response strategy outlined in this Appeal has two main objectives: slow down the transmission of the virus and mitigate the health impact of COVID-19 in the region.8

Containment measures enacted by governments in the region

LAC countries are taking measures to prevent the growth and spread of COVID-19 in the region, seeing the impact the virus is having in Europe, Asia, and the United States, and fearing the comparative capacity of their own health systems and social safety nets. As noted previously, the majority of the 15 countries covered within this note closed all of their borders, generally with exclusions for returning citizens and residents, during the month of March. 9 In addition, all countries have implemented measures to close public spaces and limit social gatherings, with over half of the countries putting in place stricter national measures such as curfews10 and/or quarantine orders to “take shelter at home”11 (see Annex 1 for more information).

There have also been various coordination efforts among LAC governments. For example, the Forum for the Progress of South America (Prosur) remotely gathered Heads of States from Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Bolivia (observer) and Uruguay (special invitee) on 16 March to agree on a joint declaration to work together in a “coordinated and efficient manner” to address the public health emergency, outlining measures that, among other things, pledged co-operation to ensure that nationals can return to their home nations despite travel and movement restrictions. The countries of the Central American Integration System (SICA)12 also met virtually on 11 March and subsequently approved a regional contingency plan13 to deal with the COVID-19 pandemic, along with a dedicated website entitled “Central America united against the Coronavirus”.14

Healthcare system challenges and measures

Meanwhile, growing numbers of patients, inadequate protective equipment for health workers and limited facilities to provide intensive care add to the fears of a contagion in the region that would be hard to control. In general, LAC countries’ healthcare systems have significantly lower capacity than the OECD average, with lower health expenditures, fewer hospital beds and health professionals per 1000 inhabitants, and weaker disease surveillance systems than OECD countries. For example, while Mexico, Costa Rica, Colombia and Chile have at most at 2.1 beds per 1000 people, the OECD average is 4.7 (OECD, 2019[4]). These capacity gaps extend beyond number of beds to also include issues like testing; for example, the Health Ministry of Costa Rica announced on 11 March that it will no longer report suspected cases in the country, as the country’s number of suspected cases exceeds the testing capacity of Costa Rica’s national lab.

Furthermore, the COVID-19 pandemic cruelly evidences the inequalities in access to health services, in a region where some 125 million people still lack access to even basic health services and more than 47% of the population lacks access to social security (PAHO/WHO, n.d.[5]; Bárcena, 2020[6]). Lack of strong universal health coverage leaves many unprotected against potentially catastrophic health spending, too. For those who are only mildly sick, have good health coverage, and live in well-equipped areas, contacting the virus means going on sick leave, being able to access health services as needed, and continuing to receive a salary. However, for those at the bottom of the income chain, those without good health coverage, those working in the informal sector and those living in remote or underserved areas, becoming ill can have catastrophic consequences, both on their health and on their livelihood. Many are not covered by health insurance and face a higher risk of mortality because they cannot get good quality health care.

In light of these challenges, LAC countries have been undertaking measures to boost the capacity of their healthcare systems to cope with this crisis, as well as to boost access for all citizens. Some of the measures, such as those concerning mental health and domestic violence are quite innovative and could serve as an example for other countries. For example:

Regional initiatives:

  • Prosur member countries agreed on a joint declaration that includes measures to purchase medical supplies and equipment jointly to deal with the pandemic and coordinate with regional multi-national organisations.

  • The aforementioned SICA Regional Contingency Plan15 mobilizes the existing Council of Ministries of Heath for the sub-region (COMISCA) to jointly engage in negotiations and purchases of medical equipment for SICA member countries, alongside various coordinated communication and response measures related to health and risk management. This has already led to the purchase of 180,000 COVID-19 test kits, using SICA funds from the Central American Bank for Economic Integration (CABEI).

  • On 5 April, Mercosur approved a USD 16 million special fund for the use of its members in fighting the pandemic, especially to acquire more testing kits.16

  • The Ibero-American Medicines Authorities Network, with the support of the Ibero-American General Secretariat (SEGIB), has created a digital platform where the 22 Ibero-American countries17 will be able to share and consult official information on treatments, clinical trials of medicines and technical guides for health personnel, in order to face the COVID in the region.

National initiatives

  • Argentina announced on 18 March that it will build eight emergency hospitals to combat the virus.

  • Brazil opened 5,000 vacancies for doctors through the Mais Medicos programme and announced the creation of 2,000 new ICU beds, while also approving the inclusion of the COVID-19 test as an obligatory procedure in health insurance plans for suspected carriers. Furthermore, on 11 March it was agreed to dedicate at least USD 1 billion of a budget bill to the Health Ministry to battle the virus; around USD 185 million will be transferred to states and municipalities to cover extended hours in public health facilities, distributed according to state population.

  • Chile established a maximum cost of USD 30 for the COVID-19 test in private healthcare facilities.

  • Colombia announced the virtual deployment of about 2,500 mental health professionals on 24 March, to support national quarantine “shelter at home” measures.

  • Costa Rica put in place price regulations for alcohol gel, liquid disinfectants, spray disinfectants, bar or liquid soap, and disinfecting towels.

  • The Dominican Republic announced that, as of 7 April, all formal laborers (and their dependents) whose work has been disrupted by the crisis would continue to be enrolled in the national Family Health Insurance program for the next 60 days.

  • Ecuador has made COVID-19 tests free of charge for anyone with symptoms.

  • Peru announced that it was purchasing 1.4 million coronavirus quick test kits from China and began contacts with China to purchase the portable hospital that was built in 10 days in Wuhan.

  • Panama has suspended all non-essential surgeries and hospital visits from 16 March to create greater hospital capacity.

  • Uruguay has launched a mobile application to situate cases in the country and a website. The country also announced on 28 March measures to stop the rise in gender violence during the quarantine, including an awareness campaign on social and mainstream media, an emergency hotline, and a protocol from the Health Ministry for personnel to detect cases of domestic violence.

Policy priorities going forward

The immediate priorities include:

  • Increase capacity for extensive testing to the extent possible, ensuring availability of drugs when patients are admitted to intensive care, and provision of medical attention regardless of an individual’s payment capacity.

  • Enhance the supply of personal protective equipment such as masks, in particular for health workers, as well as ICU beds and respirators.

  • Mobilise health professionals, including medical and nursing students in their last year of study, pharmacists and other care workers.

  • Develop laboratory, logistics, and professional capacities for testing and treating infected people, while tracing their close contacts.

  • Deploy strategies to boost infrastructure and capacity for isolating those infected and quarantining close contacts.

  • Protect and support health-care workers, by ensuring their safety and making necessary arrangements for accommodation, family care, transportation as well as psychological and financial support.

In the medium term:

  • Ensure timely access (via domestic production or purchasing from abroad) to viral testing kits for all those suspected of having contracted the virus.

  • Develop a strategy for administering serology tests, when those become available, to assess the level of immunity in the population and in key population groups such as health professionals.

  • Ensure timely and universal access to vaccines and treatments, when one becomes available.

  • Establish mental health strategies to support those in need, both in the general population and for health workers.

Long-term considerations for greater resilience:

The crisis has forced governments in the region to revise their levels of public investment in health (for now close to 4% share of their GDP compared to an average of 6.6% for OECD countries)18 and quality monitoring in their health systems. In most LAC countries, households cover a substantial part of their total health spending from their own out-of-pocket resources (Mueller and Morgan, 2020[7]). In the long term, new strategies will be needed to improve the resiliency of health systems and their capacity to react to future sanitary crises. These include continuing to make progress towards universal coverage of high quality services, strengthening health information infrastructure, and improving governance and co-ordination of responses to outbreaks.

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The social dimension of the COVID-19 crisis in LAC

Specific policy challenges for the LAC region

On 31 March, the Director General of the WHO, Tedros Adhanom Gebreyesus, stated that the COVID-19 pandemic will hit emerging and under-developed economies the hardest, and he recommended that governments put in place social policies to shield their most vulnerable populations and ensure that they are able to comply with public health recommendations.

In particular, the LAC region faces the following set of social challenges alongside and in conjunction with their policy responses to this crisis:19

  1. 1. Informality/lack of universal safety nets: Countries with 30-80% informality rates, such as the majority of those in the LAC region20, face particular challenges: 1) for informal and low skilled workers, reduced hours and job loss due to the pandemic means loss of income with no possibility of receiving unemployment benefits; 2) informal workers generally lack access to official social safety net measures; and 3) confinement implies no work and thus no income, creating a “work or lose your income” dilemma (OECD Secretariat, 2018[8]; OECD et al., 2019[9]; Belser, 2020[10]). Many are own-account workers, working in the subsistence economy, living day-by-day, and are at risk of slipping back into poverty. While the region’s social insurance and major social assistance programmes cover two-thirds of workers (62%) and their families, including most of the poor households, 65% of vulnerable informal workers do not benefit from any form of social protection (Bonaglia and Nieto Parra, 2020[11]).

  2. 2. Citizens’ perceptions: While the public is showing strong solidarity in confronting the COVID-pandemic, just months ago, many countries in the region experienced a wave of mass protests driven by deep social discontent, frustrated aspirations of an emerging “middle-class”, and persistent vulnerability with the risk to fall into poverty (Nieto-Parra, Pezzini and Vázquez, 2019[12]). The crisis could exacerbate these problems.

  3. 3. Inequality: As the crisis deepens and/or spreads, there will be increased scarcity and competition over resources, with, for example, richer communities wanting to use their right to pay for better treatment in private hospitals. This same part of the population is able to practice social distancing, get sick leave, and/or continue receiving a salary. However, vulnerable populations face stressful challenges in practicing social distancing, as many of them are neither covered by health insurance nor unemployment benefits (Belser, 2020[10]).

  4. 4. Vulnerable indigenous and migrant populations: The indigenous populations in countries such as Peru, Ecuador, Bolivia and, to a lesser extent Mexico, are very vulnerable to pandemics in general. They have the highest levels of informality and a higher prevalence of illness such as hepatitis B, tuberculosis, malaria and dengue (Sierra Praeli, 2020[13]). The COVID-19 crisis also hits Latin America in the midst of the largest migration crisis of its history. Between 2016 and 2019 close to 4.5 million Venezuelans left the country; at the same time, thousands have left from Guatemala, Honduras and El Salvador for Mexico and the United States, and from Nicaragua to Costa Rica and Panama. Migrants are particularly effected by the economic consequences of the virus, as many live in precarious housing and sanitary conditions and do not have access to basic services or social protection.

Policy responses

As will be examined in further detail in the next section, all countries have put in place economic stimulus measures to give relief to both companies and individuals, and often with a special emphasis on vulnerable SMEs. However, the operation of many SMEs and individuals in the informal sector further complicates even these targeted measures from reaching the most vulnerable. Thus, many LAC governments have implemented additional social measures to complement their economic recovery efforts and ensure that compliance with containment restriction measures is possible for those with low-incomes and/or inability to work from home. These measures often include temporary expansion of existing cash transfer and in-kind programmes, and additional transfers to reach vulnerable people not covered by existing programmes (Bonaglia and Nieto Parra, 2020[11]).

Going forward, the region can, in itself, become a parameter for innovations and benchmarking in this regard. Depending on the structure of formal and informal employment, for example in terms of the share of low-income workers, governments can evaluate whether to provide income support or temporary exemptions from payroll taxes or social contributions to formal workers whose hours have been reduced, in order to encourage employers to keep them on their payroll. Such measures could help maintain some of the gains in employment formalisation made in many countries in the region in the past few years. At the same time, they should only be envisaged if they do not come at the expense of aid to the most vulnerable.

An overview of current measures is given in the following table:

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Table 1. Social policy measures implemented in response to the COVID-19 crisis in LAC

Measures

Regional

  • The UN Food and Agriculture Organisation (FAO) gathered 25 LAC Ministers and Secretaries of agriculture, food, livestock, fisheries and rural development at the beginning of April. Resulting from this meeting, a joint statement was signed, detailing measures to ensure food security during the COVID-19 crisis. The members of the declaration pledged to provide technical and financial assistance to agricultural, fishing, livestock and agroindustrial SME producers, with the aim of promoting sustainability and increasing production. Emergency programs will be developed to prevent the loss and disposal of food. Food emergency system committees will also be established to facilitate constant monitoring of supply and the status of the markets.

Argentina

  • All beneficiaries of the Universal Child Allowance (AUH) will receive an extra payment equivalent to what they receive every month as social assistance;

  • Implementation of a family emergency income of almost USD157 for April, subject to extension. This measure targets 18-65 year-old self-employed and informal workers who have lost all forms of income since the Coronavirus outbreak.

  • Suspended evictions for those who cannot pay their rent until 30 September.

  • Prohibited firing employees during the next 60 days.

Brazil

  • Emergency universal income plan with USD120 in monthly payments for the most vulnerable (“coronavoucher”), such as the elderly, the informally employed, and the disabled (payment amount doubled for single mothers at the head of a household). A mobile app and website was launched to facilitate the registration of informal workers to receive this benefit.

  • Anticipated payment of the 13th month pay for retirees and pensioners

  • Expansion of the Bolsa Família conditional cash transfer programme to a further 1.2m families in April (after being cut by 158,000 beneficiaries in March).

  • School meals may be distributed directly to families of public school students while schools are closed.

Chile

  • Passed a law protecting labour income: that is, each worker who cannot telework will have a suspension of functions, maintaining a contractual link and payment of remuneration. For this, the government is injecting USD 2 billion into a special unemployment insurance fund.

  • Creation of the COVID-19 Bond, which is part of an economic plan allowing low-income families to delay debt payments without having utilities cut off, providing USD 60 to each of these families.

Colombia

  • Additional financial resources via social programmes to 2.5 million impoverished households, 204,000 youths and 1.5 million elderly people.

  • Free water access to over 1 million people who didn’t have access because of lack of payments.

  • Announced the disbursement of about USD 40 to 3 million low income families on 24 March.

  • Distribution of 23 tons of food and 96 million gallons of water to vulnerable populations.

Costa Rica

  • On 9 April, the government launched a subsidy programme (Plan Proteger) for workers that have experienced layoffs, reduced hours or lower income due to the crisis – they can apply online to claim a monthly benefit of between USD 110-218, initially for a three-month period, with possible extension.

Dominican Republic

  • Announcement of an economic package worth USD600K to alleviate salary losses and food insecurity. Starting on 1 April until 31 May, the 800,000 families already subscribed to the country’s social welfare programme Tarjeta de Solidaridad will receive a monthly payment ranging from USD27-130 for foodstuffs and first aid products. 700,000 other families outside the social welfare programme will also receive this assistance.

Ecuador

  • Announcement of a 12 month deferment with no surcharges aimed at farmers, small merchants and artisans who cannot pay their water and electricity between April and June. 

El Salvador

  • Announcement of a subsidy on 21 March of roughly USD 300 per household for about 75% of Salvadoran households, as well as a freeze the prices of basic goods.

Guatemala

  • Announced a USD 26 million emergency fund to help families in need during the epidemic, giving USD 129 to those who meet the requirements to cover costs for electricity, water and supplies.

Honduras

  • Announcement of a “solidarity bag” scheme, which guarantees the supply of basic goods to 800,000 impoverished families (3.2m people) for 30 days as of 25 March. General price freezes for 30 basic grocery items are also in effect from March 19 – May 27.

  • Transfer of USD 14m to local mayors to purchase food and cleaning products to distribute to the most affected families.

Mexico

  • Advance for senior citizens on their next pension deposits (as of 18 March), receiving two payments instead of one.

  • Announcement (30 March) that companies that avoided paying workers or defied rules could face sanctions.

Panama

  • Announced on 24 March that people who have lost their jobs will not pay utilities or face internet cuts for the next three months.

Paraguay

  • On March 25, the government announced the Ñangareko program, involving money transfers for food and hygiene products to roughly 33,000 families whose income has been affected by quarantine.

  • On March 30, President Benítez announced a reduction of state salaries to save roughly USD 52 million. The measure decrees that no official salary should exceed USD 5,635 monthly—the presidential salary.

Peru

  • 3 million vulnerable people will benefit from a USD 110 bonus per family per month, thus impacting about 9 million total.

  • Advance payments in the Contigo and Pension 65 pension programmes, which benefit people with severe disabilities and those over 65 in situations of poverty.

Uruguay

  • The Social Development Ministry will receive USD 22 million to reinforce social programmes, such as building refuge centres and extending salaries on the Social Uruguay Cards, a government-funded resource for the most disadvantaged to access food and basic need products.

  • A food plan is being implemented by the government in coordination with communications company Antel: the most economically vulnerable will be able to access a USD 27 spending bonus via a phone application.

  • Announced on 24 March the future disbursement of funds to 55 000 workers over 65 years old in both the public and private sectors as a way to make sure they stay at home.

  • To save money, the salaries and pensions of public sector officials earning in excess of Ur$80,000 (USD 1,800) per month will be reduced by between 5% and 20% beginning in April, while the salaries of the President, cabinet ministers, legislators, and directors of state institutions will be cut by 20%, for at least two months. These savings will go into a Fondo Coronavirus to cover costs associated with combatting the virus.

Primary Source: (Horwitz et al., 2020[2]). Additional regional tracking efforts consulted include ECLAC’s policy tracker (https://www.cepal.org/es/temas/covid-19), which includes containment, health, economic and social measures; SEGIB’s policy tracker (https://www.segib.org/covid-19/), and Latin American Newsletters’ “Latin American Weekly Report” (https://www.latinnews.com/component/k2/itemlist/category/33.html?archive=true&archive_id=33). All Latin American Weekly Report issues over March 2020 – 24 April 2020 were consulted in the preparation of this note.

Policy priorities going forward

Informal and low-skilled workers:

  • Strengthen social safety nets to non-standard workers.

  • Provide income support and benefits to low-income families through non-contributory social security schemes or existing cash transfer programmes.

  • To the extent that fiscal space allows, consider one-off payments to affected workers.

  • Review the content and/or timing of reforms enlarging access to unemployment benefits that are already scheduled.

  • Help low-skilled and informal workers stay in their homes by suspending evictions and deferring mortgage and utility payments.

  • Extend access to unemployment benefits to low-skilled and non-standard workers.

  • Moving forward, governments must speed up ongoing efforts towards the expansion of social protection systems and coverage. Increasing state capacity will allow to it to more easily protect the most vulnerable populations and speed up the response to future shocks. The crisis could create a direct relationship between the government and the informal economy, facilitating a comprehensive registry and a gradual follow-up with formalisation programmes.

Education and care responsibilities:

  • Offer public childcare options to working parents in essential services, such as health care, public utilities and emergency services.

  • Provide alternative public care arrangements.

  • Offer direct financial support to male and female workers who need to take leave.

  • Give financial subsidies to employers who provide workers with paid leave.

  • Promote flexible working arrangements in line with the workers’ family responsibilities.

  • Open specific lines to assist those encountering domestic violence during the COVID-19 crisis.

  • Introduce and enhance existing digital learning platforms, as some countries in the region have done.21

  • Complement digital learning spaces with initiatives of TV-based education which have been since many years used in Latin American countries to support education in remote places.

  • Provide families with support to replace school meals.

  • Keep teachers as closely engaged and connected with learners and their families as possible during the confinement periods, seeking to advance the curriculum encouraging the support of parents and siblings to the extent possible.

  • Pay close attention to ensure that technology does not amplify existing inequalities in access and quality of learning further.

Migrants:

  • To the extent possible, maintain the exemplary policy support to migrants that many Latin American countries have had in solidarity with migrants from the region.

  • Ensure that vulnerable migrants have access to basic healthcare and other support, and take precautionary measures to avoid massive contagion in confinement areas.

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The economic dimension of the COVID-19 crisis in LAC

Impact

Until now, the effects of the COVID-19 crisis in the LAC region have been concentrated in the economic sphere, as the necessary containment measures against COVID-19 have engendered an unprecedented global economic crisis, combining supply and demand side shocks. As across the globe, the economic impact of COVID-19 for the LAC region is mainly twofold. First, it is of an external/demand-driven nature. Latin America is highly dependent on China’s economy, and the region will feel the crisis even more as the effects of the virus on the US economy increase. The sharp decline of global demand is affecting exports, with a deterioration of terms of trade for several countries. Furthermore, the impact in the tourism sector, which is a major economic contributor across the region and is having to shut down completely due to internal and external travel restrictions, will be substantial.

On the supply side, the second type of impact comes from the aforementioned stringent domestic containment measures that LAC governments have imposed on their countries. The lockdown measures, although different in scale and scope, are slowing down or even stopping economic activities in certain sectors, having a ripple effect to other sectors.

In addition to this general situation, the LAC region specifically is being impacted through various external channels, including the financial market, trade, investment, commodities and the tourism sector.22

The crisis hit a region that was already in a difficult situation. In 2019, the region grew only 0.1% and pre-COVID-19 crisis growth predictions of ECLAC and the IMF for 2020 were 1.3% and 1.6% respectively. Some of the largest countries in the region have been going through difficult times: Argentina contracted 2.4% in 2019, and Brazil, Mexico and Chile grew only by 0.9%, 0.1% and 1.1% respectively.

In recognition of this situation, several observers have revised down the growth prospects of the region, pointing to a recession probably more severe than that experienced in 2015-2016: ECLAC estimates a regional recession of -5.3% with several downside risks and a fall in regional exports of -14.8% (UN-ECLAC, 2020[1]). The Economist Intelligence Unit has released revised growth figures for Argentina (-6.7%), Brazil (-5.5%), and Mexico (-6.5%), with the approach of the southern hemisphere winter raising the prospect of a difficult, prolonged epidemic for South America (Economist Intelligence Unit, 2020[14]). The expected slowdown in economic growth is thus substantial across the region, although the scale of the slowdown or negative growth will depend largely on how this crisis will come to an end and when the recovery could start to pick up (OECD Secretariat, 2020[15]).

Policy measures

All countries have put in place economic stimulus measures to alleviate the negative impact caused by the crisis and tackle the general economic slowdown; these measures are directed to give relief to both companies and individuals in terms of their access to finance and ability to comply with payments during this crisis, such as of taxes or utilities.

Several governments have put in place targeted policies to support vulnerable SMEs, including specific financing lines, low-cost or zero interest loans, payment of salaries through public funds, postponement of various tax payments and social security contributions, and postponement of loan payments. Furthermore, countries have taken measures to lighten the financial and procedural burden of personal tax, public utility, credit card, loan and mortgage payments. The volume of the measures by country is shown in Figure 2 below. As the specific measures employed by each country within these categories vary substantially, Annex 2 provides a more detailed overview by country.

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Figure 2. Announced economic packages in selected LAC countries (% of GDP)
Figure 2. Announced economic packages in selected LAC countries (% of GDP)

Source: (Werner, 2020[16])

On the regional front, the countries of the Central American Integration System (SICA) have acted comparatively swiftly and in coordination. Their aforementioned regional contingency plan23 includes USD 1.9 billion in economic stablisation funds, with USD 1 billion going to a contingency fund for Central Banks, USD 550 million going to a Fiscal Emergency Fund, and USD 350 million going to a commercial bank liquidity fund. In terms of international lending, the IMF is deploying USD 1 trillion lending capacity and 14 Latin American countries have approached it to fight the COVID-19 recession. The financial packages put together by the World Bank (availability of resources for operations between USD 7-10 billion), the Inter-American Development Bank (USD 3.2 billion additional to existing programming for 2020, totalling USD 12 billion)24 and CAF-Development Bank for Latin America (emergency credit line of USD 2.5 billion)25 are very timely and commendable responses.

Policy priorities going forward

The immediate priorities on the macro-economic front:

  • Expansionary fiscal and monetary policies are essential to prevent the current downturn from becoming a prolonged recession.

  • On the fiscal side, while some countries such as Chile and Peru have relatively comfortable fiscal space, many countries might need to incur debt. Countries that have existing financial buffers from oil or mineral exports should reprioritise spending and mobilise new borrowing to address the COVID-19-shock.

  • Monetary measures are required to provide adequate liquidity in the financial system, allow banks to provide help to companies with cash-flow problems, particularly SMEs, and ensure that otherwise solvent firms do not go bankrupt whilst containment measures are in force.

The immediate priorities to support entrepreneurs and small business owners include:

  • Set up dedicated financial facilities to help small businesses address the short-term consequences of the outbreak, including:

    • Temporary tax relief, such as tax payment delays, temporary VAT reductions and postponement of charges and social security contributions, which help keep businesses afloat and maintain employment.

    • Dedicated loan programmes with enhanced access to working capital through credit lines or state guarantees, low-cost or zero interest loans, and postponement of loan payments.

    • Direct financial support including payment of salaries through public funds or other specific measures for the tertiary sector, particularly affected by the confinement measures (such as restaurants, hotels, taxis and local businesses).

  • Actively inform firms about how to reduce working hours, provide relief for workers, and manage redundancy payments related to temporary lay-offs and sickness.

  • Ensure that the self-employed can access emergency financial measures, especially those who do not qualify for employment insurance.

  • Introduce mediation measures concerning procurement and payment delays.

Medium term priorities to support entrepreneurs and small business owners include:

  • Consider more forward-looking support measures to strengthen business resilience, e.g. Training or mentoring programmes to help SMEs assess and manage the financial impact of the crisis, go digital or find new markets.

  • Ensure an inclusive tripartite dialogue so that small business owners and trade unions can voice their concerns and priorities when public policy reforms are being envisaged.

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The governance dimension of the COVID-19 crisis in LAC

Challenges

The COVID-19 crisis is also testing the relatively young and still consolidating democratic governments of the region, which were already going through a challenging period marked by a wave of mass protests over late 2019-early 2020, driven by deep social discontent, frustrated aspirations, persistent vulnerability and growing poverty.26 LAC governments, whose credibility has already been heavily contested after a string of corruption scandals leading up to the 2018 Summit of the Americas, are now also facing new challenges in managing the operational and communicational aspects of the crisis in a coordinated fashion across all levels of government, including at sub-national level.

Virtual sessions of congress, ministerial cabinet meetings and day-to-day operations of institutions are now widespread. Digital government capabilities, as well as the necessary infrastructure, will become more important than before to sustain and overcome the COVID-19 economic, social and health crisis.

Extraordinary measures meant to protect citizens, like restricting access to public information and tracking applications -- considered normal in times of crisis -- might endanger civil liberties and the civic space in the long term. Control and accountability mechanisms are needed to ensure that extraordinary measures are lifted once the immediate threat is over and that governments are accountable for the actions taken during the crisis.

There is a real risk in some countries that confinement measures could exacerbate social unrest and increase criminality. In addition, with the State being unable to contain the spread of the virus in overcrowded penitentiary facilities, the fear of being infected has spread in prisons across the region, leading to riots and the escape of hundreds of inmates, notably in Brazil and Venezuela.

Ensuring continued access to justice -- including to the groups most affected by the crisis, such as the disadvantaged and small and medium enterprises -- will require significant coordination and joint service delivery efforts across sectors, levels of government and branches of power, even as resources become more scarce. The increasing risk of domestic and street violence puts growing pressure on the justice systems to come up with innovative, transparent and effective ways to both respond to the needs of victims of violence (especially women and children) and to enforce confinement measures.

Governments will have to shift policies and public services to answer post COVID-19 related needs. Higher policy coherence is today more critical than ever as the current crisis has indeed underlined the value of the digital transformation of public sectors and governments to ensure the continuity of public services delivery and governments’ operations. In order for post-crisis policy and public services packages to be inclusive and answer the real needs of the people, LAC countries need to put in place participatory mechanisms to create a virtuous feedback loop, tap into collective intelligence and answer the needs of the silent majority.

Strengthening integrity and fighting corruption will be key as inflows of financial and technical aid will be swiftly delivered to cope with the COVID-19 crisis. The risk of corruption practices is larger than before as individuals or groups will want to take advantage of the situation at a time when state actors are focused on providing emergency assistance. It is critical for countries to ensure a fundamental role of open government data (OGD) in the pandemic not only to manage the crisis, but also in relation to balancing the velocity of budget allocation with the need of transparency and integrity.

Policy priorities going forward

The immediate priorities include:

  • Strengthen public communications and transparency for trust and credibility in public decision making as part of crisis management. Governments in LAC can reinforce legitimacy and compliance during and after the COVID-19 crisis by promoting the proactive and reactive disclosure of data and information, as well as their reuse, and by fighting against disinformation.

  • Increase capabilities of governments to function in a teleworking mode and enhance connectivity measures, portability of working stations and digital government capacities. Horizontal accountability check and balances are essential when facing extraordinary measures. Parliaments, the Judiciary and independent institutions will also have to scale up their digital and remote working capabilities.

  • Administer and enforce lockdowns and other restrictions on movement fairly and transparently, in partnership with communities, while strengthening measures to prevent and protect people from domestic and street violence, via greater monitoring and increased investment in telephone and online reporting systems.

  • Government authorities and judiciary systems will need to develop innovative, transparent and effective ways to enforce confinement measures and to respond to the needs of victims of street and domestic violence (especially women and children).

  • Ensure high standards of integrity and transparency and appropriate control measures in the management of funds and extraordinary policies implemented as a result of this crisis. Existing initiatives in LAC using open government data and innovation in public procurement, for example, could be extended to the management of COVID-19 related funds.

In the medium term:

  • Both during and after the COVID-19 crisis, create opportunities for citizens and stakeholders to join in efforts to build trust, improve the quality and the equity of policies and services and advance social cohesion. Both during and after the COVID-19 crisis, create opportunities for citizens and stakeholders to join in efforts to build trust, improve the quality and the equity of policies and services and advance social cohesion. LAC countries can benefit from their participation in addressing critical COVID-19 related policy areas such as emergency health responses, fiscal and redistributive policies, and essential public services (housing, water, electricity and internet access) to advance inclusion, efficiency and compliance. LAC countries can benefit from enhanced citizen engagement in addressing critical COVID-19 related policy areas such as emergency health responses, fiscal and redistributive policies, and public service delivery to advance inclusion, efficiency and compliance.

Long-term considerations for greater resilience:

  • Governments will have to evolve policies and public services to respond to specific post-COVID-19 concerns. In order for post-crisis policy and public services packages to be inclusive and respond to citizens’ needs, LAC countries should put in place participatory mechanisms that help create a virtuous feedback loop, tap into collective intelligence and respond to the needs of the silent majority.

  • The resilience of public service delivery depends on the extent to which governments taken a “digital by design” approach - those who have adopted cross-government strategies and enablers for omnichannel service design and delivery will be better equipped to ensure the continuity of coherent service delivery during lockdown periods. Thus, LAC governments should prioritise investing in inclusive, agile, resilient and robust public services design and delivery models.

  • To ensure that the region emerges from the crisis with strengthened public trust, governments must take care to avoid policy loopholes that could allow for fraud, corruption, deviation of funds or the improper use of direct transfers. To ensure that the region emerges from the crisis with strengthened public trust, governments must take care to avoid policy loopholes in emergency programmes that could allow for fraud, corruption, deviation of funds or the improper use of direct transfers.

References

Bárcena, A. (2020), Hora Cero: Nuestra región de cara a la pandemia, UN Economic Commission for Latin America and the Caribbean (ECLAC), https://www.cepal.org/es/articulos/2020-hora-cero-nuestra-region-cara-la-pandemia (accessed on 22 April 2020). [6]

Belser, P. (2020), COVID-19 cruelly highlights inequalities and threatens to deepen them, International Labour Organisation (ILO), http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_740101/lang--en/index.htm (accessed on 22 April 2020). [10]

Bonaglia, F. and S. Nieto Parra (2020), Latin America and the Caribbean in the time of COVID-19: Preventing the vulnerable from falling behind, Development Matters, https://oecd-development-matters.org/2020/03/31/latin-america-and-the-caribbean-in-the-time-of-covid-19-preventing-the-vulnerable-from-falling-behind/ (accessed on 22 April 2020). [11]

Economist Intelligence Unit (2020), COVID-19 to send almost all G20 countries into a recession, The Economist, https://www.eiu.com/n/covid-19-to-send-almost-all-g20-countries-into-a-recession (accessed on 22 April 2020). [14]

Hausmann, R. (2020), Flattening the COVID-19 Curve in Developing Countries, World Economic Forum, https://www.weforum.org/agenda/2020/03/flattening-the-covid-19-curve-in-developing-countries/ (accessed on 22 April 2020). [3]

Horwitz, L. et al. (2020), Where Is the Coronavirus in Latin America?, AS/COA - Americas Society Council of the Americas, https://www.as-coa.org/articles/where-coronavirus-latin-america (accessed on 22 April 2020). [2]

Mueller, M. and D. Morgan (2020), Public funding of health care, OECD, Paris, https://www.oecd.org/health/Public-funding-of-health-care-Brief-2020.pdf (accessed on 22 April 2020). [7]

Nieto-Parra, S., M. Pezzini and J. Vázquez (2019), Social discontent in Latin America through the lens of development traps, OECD Development Matters, https://oecd-development-matters.org/2019/12/23/social-discontent-in-latin-america-through-the-lens-of-development-traps/ (accessed on 22 April 2020). [12]

OECD (2020), Hospital beds (indicator), https://dx.doi.org/10.1787/0191328e-en (accessed on 22 April 2020). [4]

OECD Secretariat (2020), COVID-19 in Latin America and the Caribbean: Regional socio-economic implications and policy priorities, OECD, https://read.oecd-ilibrary.org/view/?ref=129_129904-k3xp17fqbl&title=COVID-19-in-Latin-America-and-the-Caribbean-Regional-socio-economic-implications-and-policy-priorities (accessed on 22 April 2020). [15]

OECD Secretariat (2018), LATIN AMERICAN AND CARIBBEAN COMPETITION FORUM - Session I: Informal Economy in Latin America and the Caribbean: Implications for Competition Policy, OECD, https://www.oecd.org/daf/competition/44547855.pdf. (accessed on 22 April 2020). [8]

OECD et al. (2019), Latin American Economic Outlook 2019 : Development in Transition, OECD Publishing, Paris. [9]

PAHO/WHO (n.d.), EquiLAC II Project, https://www.paho.org/hq/index.php?option=com_content&view=article&id=2674:2010-equilac-ii-project&Itemid=2080&lang=en (accessed on 22 April 2020). [5]

Sierra Praeli, Y. (2020), “Pueblos indígenas: los más vulnerables frente el avance del coronavirus en América Latina”, El Deber, https://eldeber.com.bo/169684_pueblos-indigenas-los-mas-vulnerables-frente-el-avance-del-coronavirus-en-america-latina (accessed on 22 April 2020). [13]

UN-ECLAC (2020), Dimensionar los efectos del COVID-19 para pensar en la reactivación, Comisión Económica para América Latina y el Caribe (UN ECLAC), https://www.cepal.org/es/publicaciones/45445-dimensionar-efectos-covid-19-pensar-la-reactivacion (accessed on 23 April 2020). [1]

Werner, A. (2020), Economic Policy in Latin America and the Caribbean in the Time of COVID-19, IMF Blog, https://blogs.imf.org/2020/04/16/economic-policy-in-latin-america-and-the-caribbean-in-the-time-of-covid-19/?utm_medium=email&utm_source=govdelivery (accessed on 23 April 2020). [16]

copy the linklink copied!Annex 1.A. Overview of cases and restrictions

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Annex Table 1.A.1. Overview of confirmed cases and deaths, alongside travel restrictions and social distancing measures
As of 26 April

Confirmed Cases

Confirmed Deaths

External & Internal Travel Restrictions and Social Distancing Measures

Argentina

3,892

192

  • Closure of all borders from 27 March until 10 May.

  • Declaration of official “shelter at home” quarantine from 20 March to 10 May.

  • All schools and universities closed as of March 16. Online schooling platforms were introduced.

  • Shops and public spaces are closed from 20 March until 26 April, only supermarkets, small groceries shops, hardware stores and pharmacies as well as certain parts of public administration remain open.

Brazil

61,888

4,205

  • The federal response has been limited thus far to restrict entry to foreigners at all borders for 30 days, beginning on 27 March.

  • At the state level, the Governor of the State of Sao Paulo announced a 30 day quarantine to run until end of April, during which only essential services will remain operational – the state will gradually begin re-opening as of 11 May. On the same day the State of Rio closed all beaches, bars and restaurants for 15 days.

  • By April, most Brazilian states were enforcing social distancing for the entire population.

Chile

13,331

189

  • Closure of all borders on 18 March, allowing only Chilean citizens to re-enter the country with an obligatory two-week quarantine.

  • Announcement of a national curfew from 10pm to 5am starting on 22 March. Nationwide closure of schools until further notice.

  • Lifting of quarantine for ten municipalities across the country from 12-14 April and establishment of quarantine in eight new one as of 16 April under the government’s “strategic and dynamic quarantine” method.

Colombia

5,370

244

  • Closure of all borders and ports from 17 March to 30 May.

  • Required citizens over 70 years-old to be in house confinement.

  • Nationwide quarantine, beginning on 27 March until 11 May; on April 13, additional gender-based movement restrictions were instituted, with men allowed to go outside on “odd” days and women on “even” days. Construction and manufacturing work will be allowed to restart on 27 April.

  • Suspension of international commercial flights starting 23 March for 30 days, urged Colombian citizens travelling abroad to return by the evening of 22 March.

  • Suspension of schools from 16 March to 31 May, and will transition students to on-line learning.

Costa Rica

695

6

  • Declaration of the state of emergency on 18 March, closing all borders to foreigners and non-residents until at least 30 April. Residents and tourists who leave the country during this time will not be allowed re-entry until at least 1 May.

  • Required citizens and residents of the country to undergo a two-week quarantine if returning from abroad.

  • Closure of schools and universities until 30 April and requirement for public spaces to operate at 50% capacity. All establishments open to the public must close at 8 PM starting on 29 March (pharmacies and food businesses exempt).

  • Closure on 15 March of all bars, casinos, and nightclubs.

  • Closure on 24 March of all beaches and religious centres across the country until 30 April, and a nationwide car restriction that prohibits driving between 7pm and 5am – there are also daytime vehicle restrictions based on license plate numbers.

Dominican Republic

6,135

278

  • National state of emergency went into effect on 19 March, including closure of all borders and the suspension of most commercial and cultural activities. Grocery stores, gas stations, pharmacies and markets will remain open.

  • Nationwide curfew between 5pm-6am beginning 20 March.

Ecuador

22,719

576

  • Suspension of all classes in educational institutions from 13 March.

  • Entry of foreigners forbidden on 14 March.

  • Suspension of any gathering involving more than 30 people from 15 March, as well as citizens’ free movement within the country, except to buy food, medicine and basic, essential goods.

  • Suspension of transport between provinces and of domestic flights starting on 17 March for 14 days.

  • Entered into a “state of exception” on 16 March, during which there will be a nightly curfew from 9pm to 5 am, as well as limits on the circulation of cars determined by license plate number.

El Salvador

323

8

  • Declaration of a state of emergency on 14 March through 1 May.

  • Introduced mandatory social distancing measures beginning 11 March, during which all schools will remain closed and large gatherings prohibited. This was intensified to a 30 day national quarantine measure on 22 March.

  • All foreign travel into the country prohibited, except for citizens, residents and diplomats returning, who must complete a 30-day mandatory isolation.

Guatemala

500

15

  • Mandatory use of masks in public as of 13 April

  • Closure of all borders on 17 March, as well as suspension of all forms of work, prohibition of events of any size, closure of all public transport and all malls, and closure of all shops from 9pm to 4am, except for pharmacies and essential services.

  • National curfew beginning 22 March from 4pm to 4 am each evening; this was slightly relaxed as of 19 April to begin at 6pm.

Honduras

661

61

  • Closure of all borders on 15 March.

  • Announcing a national curfew starting at 10pm from 16 March – 3 May.

  • Closing schools, beginning on 13 March, until further notice

  • Transit restrictions, largely limiting movements per week day on the basis of the last digits of each individual’s identification card, passport, and/or driver’s license.

  • Closure of all markets and restriction of gatherings of more than 50 people.

Mexico

14,677

1,351

  • Closure of schools from 20 March to 31 May; the school year will be extended to 17 July to make up for these closures.

  • Restricted with the US authorities non-essential travel across their shared border starting on 22 March.

  • From 24 March, suspension of all private and public gatherings of 100 people or more along with work activities that would require people to travel.

  • Suspended all non-essential activities as on 30 March through 30 May including no gatherings of more than 50 people and strict self-quarantine for people over 60 years old and people in the at-risk category.

Panama

5,779

165

  • Closure of all public spaces from 16 March.

  • Suspension of all incoming international flights from 22 March for 30 days.

  • National quarantine began on 25 March, restricting people from leaving their homes only to buy medicine or food on a schedule according to their national identification card or passport numbers with a time limit of two hours, and including a curfew from 5pm to 5 am.

  • As of 30 March, the government further limited movement by designating Mondays, Wednesdays and Fridays as days for women to circulate while men can go outside on Tuesdays, Thursdays and Saturday. Everyone must remain at home on Sundays.

Paraguay

228

9

  • Suspension of public events and large gatherings on 10 March, as well as suspension of school classes until 1 September. The Ministry of Education and Science launched the platform "Tu escuela en casa".

  • Prohibition of entrance for non-citizens on 16 March for at least the next 15 days. Those who enter are requested to remain in quarantine for two weeks.

  • Mandatory curfew between 8pm and 4am from 24 March. A nationwide quarantine is also in effect until 3 May.

  • Suspension of all incoming flights, both commercial and private, until 19 April.

Peru

27,517

728

  • Suspension of on-site school classes on from 14 March. Establishment of internet, radio and television learning platform “Aprendo en Casa” as of 6 April.

  • Declaration of a state of national emergency on 15 March and extended until 10 May, requiring all of Peru’s borders closed from 16 March, prohibition of movement between Peru’s 196 provinces, and self-quarantine for all Peruvians, unless they are going to buy food or collect medicine. Starting from 12 April, women will be allowed outside on Tuesdays, Thursdays and Saturdays while Mondays, Wednesdays and Fridays will be reserved for men to circulate. Everyone is to remain at home on Sundays.

  • Nationwide curfew from 8 pm to 5 am and prohibition of all private vehicles from the roads as of 19 March.

Uruguay

606

15

  • Prohibition of stops for cruises, suspension of incoming flights coming from the US and prohibition of all flights from Europe as of 18 March.

  • Suspension of major public events from 15 March and closure of large commercial spaces such as shopping malls on 18 March.

  • Closure of all private and public schools indefinitely from 15 March; close to 1000 schools will be allowed to re-open as of 22 April.

  • Closure of the border with Argentina on 17 March and Brazil on 22 March, initially for 30 days (joint decisions).

Note: In many countries, such as Brazil and Ecuador, for example, authorities acknowledge that the actual numbers of deaths and cases are much higher than those officially reported, due to limited testing capabilities.

Source: “Confirmed cases” and “Deaths” are based on national official numbers gathered by the OECD, as of 26 April 2020. Primary source for “External & Internal Travel Restrictions”: (Horwitz et al., 2020[2]). Additional regional tracking efforts consulted include ECLAC’s policy tracker (https://www.cepal.org/es/temas/covid-19), which includes containment, health, economic and social measures; SEGIB’s policy tracker (https://www.segib.org/covid-19/), and Latin American Newsletters’ “Latin American Weekly Report” (https://www.latinnews.com/component/k2/itemlist/category/33.html?archive=true&archive_id=33). All Latin American Weekly Report issues over March 2020 – 24 April 2020 were consulted in the preparation of this note.

copy the linklink copied!Annex 1.B. Economic impact and main measures taken by LAC countries

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Annex Table 1.B.1. Country breakdown of economic impact and main policy measures taken
As of 21 April

Impact

Measures

Regional

  • Prior to the epidemic, the IMF had predicted 1.6% GDP growth for the region for 2020. On 18 March, Crédit Suisse forecast a contraction of 1.5% for Latin America in 2020, the largest since 2009, when the region contracted 2%. ECLAC estimates a regional recession of -1.8% with several downside risks and a fall in regional exports of -10.7%.

  • On 16 March, Prosur member countries agreed on a joint declaration which, while more focused on coordination in the containment and health spheres, includes measures to coordinate with regional multi-national organisations.

  • The countries of the Central American Integration System (SICA) met virtually on 11 March and subsequently approved a regional contingency plan to deal with the COVID-19 pandemic, along with a dedicated website entitled “Central America united against the Coronavirus”. The plan includes USD 1.9 billion in economic stablization funds, with USD 1 billion going to a contingency fund for Central Banks, USD 550 million going to a Fiscal Emergency Fund, and USD 350 million going to a comercial bank liquidity fund.

Argentina

  • While the new Fernández administration had hoped to conclude debt renegotiations with the country’s foreign creditors by the end of March, the COVID-19 crisis has complicated this process due to both unsettled financial markets and economic activity in Argentina grinding to a halt in response to external and compliance with internal containment measures. Missing the 31 March deadline for renegotiating the debt resulted in Argentina having to pay USD 250m due on the repayment of the ‘Bono Par’ bond. The next foreign debt service payment is a USD 500m repayment due on 22 April. International ratings agency Standard & Poor’s (S&P) downgraded Argentine debt on 7 April to SD (Selective Default). This made it the third agency, after Fitch and Moody’s, to do so.

  • The Wold Bank announced on 25 March it will lend Argentina USD 300 million in emergency funds (USD 165m in 2020 and USD 135m in 2021).

  • Within this current difficult economic scenario, the COVID-19 trade impact on Argentina is significant. China is Argentina’s second biggest export destination. For example, 75% of Argentina’s beef exports go to China and the value of these exports dropped 33% from December to January .

  • Emergency Employment and Production Assistance Programme, which includes postponing or reducing up to 95% of employer payments to the Argentinian social security agency. This Programme was expanded in mid-April to pay workers of companies facing financial crisis 50% of their salaries, as well as provide zero-interest loans to self-employed workers.

  • A EUR 43 million financing line for SMEs from Banco Nacion at soft rates, of which EUR 36 million will be for firms that produce food, medical supplies, personal hygiene and essential goods, for working capital and/or investments, and another EUR 7.2 million exclusively for teleworking.

  • Flexible fiscal measures such as minimising individual and corporate taxes.

  • Prices for food, personal care, drugs and medical products frozen for 30 days Public banks will support private companies with working capital for up to 180 days

  • Loosening monetary policy.

Brazil

  • China is Brazil’s top trade partner.

  • Hit by the COVID crisis, the Brazilian stock market tumbled over 40% so far in 2020. Brazil’s stock market Ibovespa saw its fifth circuit breaker in six sessions on 16 March. The real also fell to its lowest level against the Dollar since 1994 (date of creation of the currency).

  • 15 March: measures to facilitate the renegotiation of up to USD 690 billion in debts for companies and families in order to stimulate the economy.

  • 16 March: stimulus package of over USD 29 billion to accelerate social assistance payments, defer corporate taxes and ease workers’ access to various funds.

  • 27 March: Announced payments of the equivalent of two monthly salaries for workers employed by SMEs.

  • 1 April: New USD 6.1bn programme to subsidise salaries for those on suspended work contracts / working reduced hours.

Chile

  • On 1 April, the Central Bank announced its forecast that GDP will contract between 1.5 and 2.5% in 2020, down from the December 2019 projection of between 0.5 and 1.5%.

  • China, Chile’s top trading partner, is the destination for a third of Chilean exports.

  • Citibank bumped Chile to the top of a vulnerability index due to how the Coronavirus can hit supply chains and commodities, as well as market volatility.

  • Given Chile's strong dependence on China and on copper (prices of which have plunged), The Economist expects the virus to have a dramatic economic impact.

On 19 March, President Sebastian Pinera unveiled a USD 11.75 billion economic plan (4.7% of the GDP) – measures include:

  • The delay for the next three months of the provisional monthly payments of companies' income tax and VAT for companies with sales below USD 10 million, together with the anticipation of the return of income tax.

  • Postponement of payment of income tax and a capital injection of USD 500 million to fund loans to SMEs and individuals until July 2020.

  • Postponement of the payment of contributions in April for companies with sales of less than USD 10 million, and for people with properties with a tax assessment of less than USD 155K.

  • Announced a new labor law regulating and facilitating remote work, including mandatory requirements that stipulate work vs. personal time.

These measures were complemented on 8 April with a USD 3 billion guarantees fund for SMEs from Banco del Estado, as well as a fund of up to USD 2 billion for workers to access emergency benefits.

Colombia

  • During March, the Colombian Peso reached a record low next to the US Dollar.

  • On 27 March, S&P downgraded Colombia’s credit rating from stable to negative, warning that the country could lose its investment grade status in the next 12-18 months.

  • On 14 April, the World Bank projected the Colombian economy will contract by 2.0 % in 2020, down from a projection of 3.6% growth in October 2019.

  • New measures for individuals to refinance their debts and mortgages with banks for a 2 month period.

  • Water tariffs will be frozen for the duration of the state of emergency;

  • VAT tax return scheme to be implemented earlier than scheduled (January 2021).

Costa Rica

  • The shock will strongly hit the tourism sector as more than 3.1 million people visited Costa Rica in 2019 and 220 000 people are employed in the industry. Tourism accounts for 8.2% of the country’s GDP .

  • At the end of March, Costa Rica’s tourism institute (ICT) declared the tourism sector to be in a state of “total emergency and calamity”. The concerns raised by the ICT apply similarly to the rest of Central America, where borders have also been closed and where tourism similarly contributes a significant chunk of revenue.

  • On 12 April, the World Bank predicted that the Costa Rican economy will contract by 3.3% in 2020.

  • A 3-month moratorium on the payment of Value Added Tax (VAT), Income Tax and Customs Duties for companies, extendable to a fourth month.

  • Tax relief that effectively places a moratorium on four types of taxes from April to June: Value Added Tax; profit taxes; selective consumption taxes; and tariffs on imported merchandise.

  • Costa Rica’s national emergency commission received a USD 1m aid package on 21 March from the Central American Bank for Economic Integration (CABEI) to combat the virus in the country.

Dominican Republic

  • Not only is the tourism sector a big driver of GDP in the Dominican Republic, but it also provides crucial support to other sectors of the economy. For example, it is estimated that Dominican hotels purchase around USD 800m in produce annually, which equates to around one quarter of total domestic agriculture production.

  • More than a quarter of the Dominican workforce in formal employment has been temporarily laid off since mid-March as a result of the coronavirus crisis, according to the presidential spokesman, Roberto Rodríguez Marchena.

  • 12 April projections from the World Bank forecast that the Dominican economy will neither grow nor contract in 2020.

  • Tax burden relief for hotel sector.

  • Stimulus package for homes, small businesses and the tourism and export sectors, by cutting interest rates from 4.5% to 3.5% and an injection of USD 1.5bn into the banking system, with USD 229m going to productive sectors including tourism.

  • Three-month moratorium on monthly minimum payment on credit cards as well as waivers of late fees.

  • Central Bank approval of roughly USD 1.5 billion for banks to have available for clients, and USD 622.4 million in credit for export industries.

  • Formally employed workers that are laid off will be eligible for financial assistance from the Fondo de Asistencia Solidaria para Empleados (FASE), with the government agreeing to pay between RD$5,000 (USD 92) and RD$8,500 a month in April and May towards salaries.

Ecuador

  • Ecuador was already facing challenges to its efforts to contain the fiscal deficit, which are now compounded by plummeting oil prices. The reference price of West Texas Intermediate (WTI) fell by 24% to just USD 20.37 per barrel on 18 March, its third worst day in history and the lowest price since February 2002.

  • On 25 March S&P downgraded Ecuador’s long and short term credit rating, with default a possibility in the coming months. However, the government fulfilled on 24 March a USD 320m payment on the country’s 2020 bond to avoid “losing access to future sources of finance”.

  • The government calculates that losses for the tourism sector if the crisis persists for 90 days will amount to some USD 540m.

  • On 12 April, the World Bank projected that Ecuador’s economy will contract by 6% in 2020, down from a 0.2% growth projection in Oct. 2019.

  • Postponement of social security payments for 90 days and deferral of taxes for the tourism and export sectors and SMEs for the next three months (April-June).

  • The country will receive a total of USD 2 billion in emergency funds from three international agencies in the coming weeks: USD 500 million from the IMF, USD 500 million from the World Bank and USD 1 billion from bilateral debt, primarily from China.

  • A new fiscal policy package announced on 10 April will introduce new taxes on higher earners (both companies and individuals) to fund the expansion of a temporary monthly subsidy program for families earning below USD 400 per month.

El Salvador

  • President Bukele has acted relatively swiftly regarding foreign travel and social distancing measures – the country is the only one out of the 15 included in this note to remain at the WHO’s Level 2 classification (sporadic cases).

  • Suspension of utility, phone and internet bills for three months, to be paid back over the course of the subsequent two years.

  • Freezing payments on items such as mortgages, cars, motorcycles and credit cards.

Guatemala

  • On 9 March, the head of the Bank of Guatemala estimated a decrease of between 0.1% and 0.2% in GDP for 2020 as a result of the Coronavirus.

  • Approval of an emergency bill with a fund of approximately USD 480 million to cover senior care, health, employment, security and economic programmes during the emergency.

Honduras

  • As the second poorest country in Central America, Honduras is expected to face significant challenges associated with COVID-19. The IMF predicts that the COVID-19 crisis will impact the economic growth by the reduction of external demand, lower remittances flows, tighter external financial conditions and the contraction of tourism.

  • New 12 April projections from the World Bank predict that Honduras’ economy will contract by 2.3% in 2020.

  • Amid needs for healthcare and social protection, Honduras is receiving access to USD 143 million from the IMF, within their existing arrangements.

  • On March 16, the government announced measures such as injecting funds into the construction sector, extending credit lines to ensure access to food, and financial support for small business owners (i.e. 3 month freeze on loan repayments and special funding for companies with fewer than 10 employees). These measures were expanded on 2 April to include, among other things, the creation of a trust to guarantee loans for the agricultural sector and SMEs.

  • Delay of income tax payments from 30 March until 30 June for SMEs’ employees, which account for 70% of the workforce in the country.

  • Receipt of a World Bank credit worth USD 119 million “to strengthen the financial and institutional framework of Honduras to manage risks”.

  • The Honduran Central Bank approved a package of monetary policies – including the reduction of mandatory investments in the national currency and in the credit interest rate - to free up USD 465.5 million.

Mexico

  • The Peso saw its worst period of losses in March 2020 since Donald Trump won the 2016 U.S. election.

  • Major economic impacts should stem from interrupted supply chains, especially as the virus’ impact increases in the US, and decreases in tourism.

  • On 26 March, S&P downgraded its credit rating for both Mexico and state oil firm Pemex; on 17 April, Moody’s downgraded Pemx bonds to junk grade, and Fitch downgraded its credit rating for Mexico to BBB- (one notch above junk grade) on 15 April.

  • On 21 April, UN ECLAC forecasted a 6.5% contraction in GDP for Mexico during 2020.

  • The Central Bank will cut its benchmark interest rate by 50 basis points to 6.5%.

  • A plan (announced 24 March) to extend 1 million low or zero interest loans to SMEs.

  • Cancellation and redirection of all government public trusts on 3 April to the Federal Treasury. The 281 canceled public trusts represent more than US$ 10 billion, which will be used for social programs, economic recovery and credit lending, support for state oil firm Pemex, and public debt payments. Some trusts used for emergency purposes will be exempt.

Panama

  • Considering that 6% of global trade passes through the Panama Canal, financial analysts warn that Panama will feel the impact as the virus continues to affect trade.

  • 12 April projections by the World Bank forecast that Panama’s economy will contract by 2% in 2020.

  • Panama City’s Mayor announced that each of the capital’s 23 community councils will get USD 25K in emergency funds.

  • Postponement of mortgage and loan payments until 31 December.

Paraguay

  • April World Bank projections forecast that Paraguay’s GDP will contract 1.2% in 2020, compared to 2019’s 0% growth estimate.

  • Reduction in interest rates from 4% to 3.75%.

  • Health emergency law allowing for the allocation of up to USD 1.6 billion in loans from international organizations. Of this sum, the government will put USD 514 million toward public health services and USD 408 million for job protection.

  • Package announced on 15 April includes distributing $100 million to 1.2 million informal workers, $100 million to help finance the private healthcare subsidies, $20 million to care for the elderly, and $10 million for economic relief for 160,000 low-income families.

Peru

  • China is Peru’s top trading partner, accounting for 30% of its exports. Goldman Sachs says that Peru, along with Chile, counts as Latin America’s most exposed economy due to the Coronavirus.

  • The tourism sector is also taking a large hit; for example, on 15 March, Machu Picchu was shut down due to the declaration of the national emergency situation. Site administrators expect economic losses of up to USD 100 million due to the two week closure.

  • On April 12, the World Bank projected the Peruvian economy will contract by 4.7% in 2020down from a projection of 3.2% growth in October 2019.

  • USD 8.73bn in loans for companies, primarily benefitting small and medium sized businesses (SMEs).

  • Grace period for the payment of income tax for SMEs and individuals until early June.

  • 90% expansion of Fondo Crecer to allow SMEs to access capital.

  • Penalty-free USD 300 withdrawals during April and May for Peruvians who have made contributions to private retirement funds.

  • Beginning in mid-April, the government will subsidize the salaries of those whose jobs are completely suspended due to the pandemic, with payments of USD 225 per month.

Uruguay

  • China is Uruguay’s main export market. Uruguay’s exports in March declined by 8.5% year-on-year, according to Uruguay XXI, primarily because of a 24% fall in exports to China of beef, wool, forestry products, and leather.

  • April World Bank projections forecast that Urugauy’s GDP will contract by 2.7% in 2020, down from a 0.2% expansion in 2019.

  • Extended tax payment deadlines to the Uruguayan internal revenue and social security agencies.

  • Central Bank provision of credit lines of around USD 50 million to companies and monetary policy adjustments, including extensions to credit maturities, temporary reductions to bank reserves to stimulate credit lines, and temporary relaxation of stock market regulations.

  • On April 1, the Senate approved the COVID-19 Solidarity Fund, made up of USD 75 million in loans from domestic and international financial institutions, to cover government disbursements during the health emergency.

Primary Source: (Horwitz et al., 2020[2]). Additional regional tracking efforts consulted include the IMF’s policy tracker (https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19) of fiscal, monetary/macro-financial and exchange rate/balance of payment policies, which includes all LAC countries; ECLAC’s policy tracker (https://www.cepal.org/es/temas/covid-19), which includes containment, health, economic and social measures; SEGIB’s policy tracker (https://www.segib.org/covid-19/), and Latin American Newsletters’ “Latin American Weekly Report” (https://www.latinnews.com/component/k2/itemlist/category/33.html?archive=true&archive_id=33). All Latin American Weekly Report issues over March 2020 – 24 April 2020 were consulted in the preparation of this note.

Contact

Andreas SCHAAL (✉ Andreas.SCHAAL@oecd.org)

Jose Antonio ARDAVIN (✉ Jose-Antonio.ARDAVIN@oecd.org)

Notes

← 1. Based on national official numbers gathered by the OECD Secretariat, as of 3 May 2020.

← 2. Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, and Uruguay.

← 3. Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Paraguay, and Peru. Brazil, Mexico, Panama, Uruguay have implemented partial border closures, such as restrictions on international flights.

← 4. Chile, Dominican Republic, Ecuador, Guatemala, Honduras, Panama, Paraguay, and Peru.

← 5. Argentina, Colombia, Ecuador, El Salvador, Panama, Paraguay, and Peru.

← 6. Further information can be found in (OECD Secretariat, 2020[15]).

← 7. Argentina, Brazil, Chile, Colombia, Dominican Republic, Ecuador, Mexico, Panama, Paraguay, and Peru. Level 3 countries (clusters of cases) include Costa Rica, El Salvador, Guatemala, Honduras, and Uruguay. See https://www.paho.org/en/topics/coronavirus-infections/coronavirus-disease-covid-19 for more information.

← 9. Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Paraguay, and Peru. The remaining countries (Brazil, Mexico, Panama, Uruguay) have implemented partial border closures, such as restrictions on international flights.

← 10. Chile, Dominican Republic, Ecuador, Guatemala, Honduras, Panama, Paraguay, and Peru.

← 11. Argentina, Colombia, Ecuador, El Salvador, Panama, Paraguay, and Peru.

← 12. Belize, Costa Rica, Guatemala, Honduras, Nicaragua, Panama, and the Dominican Republic.

← 13. The Plan is accesible online at https://www.sica.int/download/?121512.

← 14. The website can be accessed at https://www.sica.int/coronavirus.

← 15. The Plan is accesible online at https://www.sica.int/download/?121512.

← 16. The funds come from the bloc’s existing “Structural Convergence Fund” (FOCEM), and were originally earmarked for the project “Research, Education and Biotechnology applied to Health”. For more information (in Spanish) see https://www.infobae.com/politica/2020/04/05/el-mercosur-aprobo-un-fondo-de-emergencia-para-combatir-al-coronavirus-y-llegaran-45000-dispositivos-de-testeo-a-la-argentina/.

← 17. Andorra, Argentina, Bolivia, Brazil, Colombia, Costa Rica, Cuba, Chile, the Dominican Republic, Ecuador, El Salvador, Spain, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Portugal, Uruguay and Venezuela. The digital platform can be accessed at https://www.segib.org/la-red-de-autoridades-en-medicamentos-de-iberoamerica-crea-una-web-con-informacion-cientifico-tecnica-util-para-combatir-el-covid-19-en-la-region/.

← 19. Further information can be found in (OECD Secretariat, 2020[16]).

← 20. (OECD Secretariat, 2018[8]); (OECD et al., 2019), Latin American Economic Outlook https://www.oecd.org/dev/latin-american-economic-outlook-20725140.htm

← 21. For example, see Chile Aprendo en Linea (https://t.co/xppOJgel4K?amp=1), Colombia Aprende (https://t.co/R729LODDuS?amp=1), and Peru Aprendo en Casa (https://t.co/MOtSlG2AYS?amp=1).

← 22. Further information can be found in (OECD Secretariat, 2020[15]).

← 23. The Plan is accesible online at https://www.sica.int/download/?121512.

← 26. For more information, see (Nieto-Parra, Pezzini and Vázquez, 2019[12]).

This paper is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries.

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Disclaimer

This paper is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and the arguments employed herein do not necessarily reflect the official views of OECD member countries.

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

© OECD 2020

The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.