Two decades of work in reducing poverty risk being lost in Latin America this year as more than 50m people plunge back into hardship, worsening the inequality which has already fuelled a wave of social protest, according to the World Bank’s new vice-president for the region.
Carlos Felipe Jaramillo said that Latin America was facing “its worst crisis since [modern] record-keeping began, at least 120 years or so ago”. The heavily urbanised region has become the global epicentre of the coronavirus pandemic, accounting for 52 per cent of global deaths in the last week, as its inadequate health systems struggle to cope.
“I am very worried about what this means for Latin America in terms of poverty, poverty numbers, employment, incomes and inequality, which has always been a problem in the region,” Mr Jaramillo told the Financial Times in an interview. “I think inequality is likely to rise in this period.”
The World Bank predicts that 53m Latin Americans will this year see their incomes fall below the regional poverty line of $5.50 per day “and it could be much worse under a downside scenario”, according to Mr Jaramillo, a Colombian economist and former government official who has been at the World Bank since 2002, most recently as director for four east African countries.
Heavily dependent on exports of oil and agricultural commodities, Latin America was struggling to grow even before the pandemic. Its economies were the world’s worst-performing last year and per capita growth has barely averaged 0.5 per cent a year over the past 10 years.
The IMF predicted last week that the economies of Latin America and the Caribbean would contract by 9.4 per cent this year, a far worse performance than Africa, the Middle East or Asia. Next year the region is forecast to recover only slowly, growing by 3.7 per cent.
In his new role Mr Jaramillo will manage a $32bn portfolio of World Bank projects, grants and technical assistance. He said Latin American governments needed to use the crisis to “rebuild better” and learn from the innovation in more dynamic parts of the world, such as east Asia and Africa.
M-Pesa, Kenya’s revolutionary mobile money transfer service which gave millions access to financial services for the first time, was an example of what Latin America “should have adopted a long time ago”, he said.
“Latin America really needs to get serious about fostering innovation and entrepreneurship and competition to address low productivity,” Mr Jaramillo added. “This is a critical watershed.”
Carlos Felipe Jaramillo of the World Bank © World Bank
Last year a wave of protest swept the region, fuelled by anger over poor-quality public services, precarious employment and stagnant living standards. Even Chile, long seen as a standard-bearer for good government and steady economic growth, was gripped by weeks of riots as protesters demanded better pensions, education and healthcare and greater equality of opportunity.
Mr Jaramillo cited three priorities for governments in the region: improving access to digital broadband services, which currently reach only about half of Latin Americans, upgrading health and education via internet technology and developing more dynamic businesses.
“Latin America really needs to get serious about fostering innovation and entrepreneurship and competition to address low productivity,” said the World Bank official. “Latin American countries have not been part of dynamic global value chains . . . there will be big changes coming up in how they are structured and that will be [a] big opportunity for Latin American countries.”
But Mr Jaramillo acknowledged that the immediate priority for governments in the region was to get through their worst-ever economic crisis and to preserve as many jobs as possible to prevent an explosion of civil unrest.
Although some economists and politicians have called for universal basic income schemes to be adopted as a tool to fight poverty, he said that discussion would have to wait.
“I do see some debates going on across the globe [about] fantastic things to do when the crisis is over and maybe this is one of those things, but while the crisis is going on, I think it’s really about making sure the patient survives,” he said.
Source: Economy - ft.com
