Latin America has become one of the hardest-hit regions of the COVID-19 pandemic. The economic crisis, generated by the outbreak, comes after several years of weak performances with its economy, high rates of unemployment, and after a period of social upheaval that shook some countries in late 2019.

Despite the fact that the vast majority of countries took measures to avoid contagion, the disease continues to spread rapidly, and the impact has been felt in several aspects, from a fall in external demand and growing uncertainty due to the collapse of tourism caused by the closure of businesses and movement restrictions to try to contain the virus.

Unemployment rates have risen, and in some cases dramatically, throughout the region. Surveys carried out in several countries reveal that the impact of the crisis is not only severe but can potentially be extended over time.

According to the Latin American Research Review website, states that due to the various internal and external shocks derived from the pandemic, in 2020 regional economic activity will suffer a contraction of 7.9%, which will constitute a recession much deeper than those caused by the global financial crisis of 2008-09 and the Latin American debt crisis of the 1980s.

However, there are reasons to moderate the more pessimistic forecasts. The international outlook is more favorable than was anticipated at the beginning of the pandemic in March, especially in trade, remittances, and finance, whose figures have not been as bad as initially anticipated. Another mitigating circumstance, in the case of  Latin America and the Caribbean, is the remarkable

magnitude of the stimulus packages adopted by various governments. Five of the ten social transfer programs with the highest population coverage in the developing world are located in the region.

That is why there are positive reasons for a rebound in 2021 when the normalization of internal and global conditions suggests recovery of the regional economy by 4.0%.

But the challenges remain numerous. The countries of Latin America and the Caribbean do not have the fiscal space that advanced economies have to face the crisis. Some were already facing difficulties before the COVID-19 outbreak. The economies of the region are also characterized by higher levels of informality, which makes it much more difficult to reach businesses and households through mechanisms such as tax deferral and wage subsidies. With limited resources and conditional instruments, a suitable design for the political response acquires crucial relevance.

More than six months after the pandemic, hopes for a complete return to normal are pinned on vaccines. The scale of the global effort to support cutting-edge research and finance production capacity is unprecedented. However, it may take time to develop effective vaccines against COVID-19, which are produced in large enough quantities, are locally available in developing countries,

and are deemed safe enough by the public. Given these challenges, Latin American and Caribbean countries may have no choice but to live with the virus, perhaps for several more years. Diana Alvarado, a Guatemalan student from the Passaic Academy for Science and Engineering said: “Many countries such as Peru for example, have been trying to completely shut down the country or even tried to help their citizens by giving them specific days to only go outside their homes and buy necessary items for them and their families, this idea didn’t work at all, I saw via news that many people didn’t obey the rules that were given the President and its government. The government is always trying to keep its citizens safe but many people don’t take this seriously. This kind of scenario, all over Latin America, has created a drastic impact on the economy, and keep in mind that many people are dying due to COVID-19 because of their own choice.” These were the strong words of the Bilingual Academy president about the COVID-19 having an impact on a South American country.

Many countries in the region have gradually relaxed quarantines and closures, either through explicit political decisions or because strict containment measures are increasingly difficult to enforce. At this point, governments may need to focus on protecting the most vulnerable while adjusting health and safety standards in all sectors and activities, so that the likelihood of contagion remains low as life continues. 

Schooling is one of the activities that deserves more attention. Distance learning, even if feasible, is unlikely to provide the same knowledge as face-to-face teaching. For many children from the poorest segments of society, it may simply not be an option. If containment measures continue to affect the education sector for too long, many children may never return to school and enter their working lives earlier than planned. And even those who return will have lost months or even years of education, undermining their future income and prospects for social mobility.

Given the unprecedented nature of the COVID-19 epidemic, the economic performance forecasts in 2020 should be interpreted with great caution. 

In Honduras, the Rural Competitiveness Project (COMRURAL) has contributed to increasing the productivity, competitiveness, and commercial links of 7,200 small rural producers of coffee, dairy, honey, and other products in Honduras. Every dollar invested by COMRURAL as part of a productive alliance has leveraged 1.5 million dollars from private financial institutions (about 12.5 million dollars in total), increasing financial inclusion and creditworthiness for small farmers. Since 2008, the project has contributed to making agricultural value chains more competitive and increasing the gross sales volume of rural producers by 23%. The producers supported by COMRURAL produce around 30% of all the specialty coffee that Honduras exports to the United States, Europe, and Asia. Mario Hernandez, a Honduran student from the Passaic Academy for Science and Engineering said that: “ I do completely understand the monetary situation at my country and I also understand that it might don’t reflect as it sounds, this means that most of the times Honduras is seen as a country that its economy is only helping or sustaining the government but I completely disagree. Every dollar invested in COMRURAL has helped to expand and make dreams come true to many farmers. In my opinion Honduras it’s increasing a lot financially speaking, but due to the COVID-19 a lot of money has been invested in hospitals and public health, I expect to see an increase in many agricultural areas by July of 2021.”

In Colombia, we prepared the first evaluation of the impact of Venezuelan migration in the country, which would serve as the basis for a national response policy and for Colombia’s National Development Plan. In January 2019, the country was deemed eligible to participate in the Global Concessional Financing Facility (GCFF). The Bank has provided a development policy loan for $ 750 million, mobilizing $ 32 million in GCFF co-financing to support Colombia’s fiscal sustainability and competitiveness amid the migration crisis. Emmanuel Buitrago, a Colombian student from the Passaic Academy for Science and Engineering said: “ I can’t expect as much from many south american countries for the next following 5 years, in this case Colombia, as well as Peru, are facing the impact of inmigration from Venezuelan to their countries. We are in a global pandemic and we can’t hold this. Our countries are not safe, I have seen the news from Colombia and I can’t recognize it, the crime levels have increased dramatically in both countries, and I don’t even want to talk about the economy, just make a simple comparison: if the United states didn’t expect this to happen, worse in South America. Remember, we are still known as the developing countries.”