COVID-19 has had devastating economic and health effects in Latin America. Though the region is home to just eight percent of the world’s population, it has suffered more than 30 percent of global COVID deaths. Latin America also experienced in 2020/21 the most severe economic crisis of any region, with a seven percent GDP contraction, compared to the global contraction of 3.3 percent.
In this context, social protection responses, such as cash transfers, are crucial for safeguarding access to basic needs such as food and medicine, and can prevent humanitarian catastrophes. Unlike in developed countries such as Germany, where social security reaches the vast majority of the population and access to housing, sanitation and basic needs are broadly met, most countries in Latin America have significant sectors of the population that work informally -about half of the labor force in the region- and live day-to-day and in precarious conditions. When the pandemic hit, governments were ill-prepared to provide the far-reaching safety-nets they activated here, even as they decreed lockdowns of various stringency.
Even though less at risk epidemiologically, children were at particular risk socially when the pandemic hit. Almost half (46 percent) of children already lived in poverty, while the corresponding figure for those over 65 years was just 15 percent. Even though the last twenty years had seen a significant expansion of government programs that provided poor mothers with cash transfers in exchange for health check-ups and school attendance of children, the scope of the programs was nowhere near the breadth and sufficiency needed. Moreover, as schools closed due to the pandemic, children also lost their regular school-provided meals.
Given these dire conditions, the last year and a half have witnessed a rapid expansion of social protection measures by governments, most centrally cash transfers aimed at providing vulnerable households with the means to survive these social distancing measures, as well as the economic crises that soon followed the other measures.
What may be surprising is how dramatic the variation in these social protection efforts has been, and not necessarily in intuitive directions. Brazil, despite a far-right president who is openly derisive of the poor, passed the most comprehensive initial emergency assistance program in the region. The reform was driven by the opposition and unanimously passed by Congress, leaving the president little option but to implement it. Once it was in place, it resulted in the lowest levels of extreme poverty recorded in the country by July 2020. Since then, assistance has decrease, while incremental expansion in Chile, also driven by opposition pressure over a reticent conservative president, has led to an even more comprehensive program in that country.
Meanwhile, at the opposite end, we find Mexico, where a leftwing, self-declared champion of the poor, has done little to help vulnerable households weather the devastating effects of the pandemic. The government did not initiate any national-level cash transfer programs in response to the hardships of the COVID-19 pandemic. As a result, UNICEF reported in September 2020 that four out of five families with children were not meeting basic nutritional requirements. With my co-authors, we have documented these differences in social protection measures in ten Latin American countries.
Aside from vaccinating the population, the region now faces two monumental, and related, challenges. First, governments need to establish a new social contract with children, to begin alleviating and redressing the lost time and hardship that they have endured over the past two years. The physical school closures in Latin America have been the longest in the world, and combined with nutritional insecurity, family mental stress, and reduced access to healthcare, the effects have been devastating. Poverty has increased, and school dropouts among the poor have sky-rocketed. This new social contract requires both broad investment in cash transfers for children, but also bolstering public education coverage -including full-time days, and extending it to younger children- and quality. The good news is that the efforts that governments have undertaken to update their databases as they developed new emergency assistance programs can help in extending the reach of both cash transfers and services to vulnerable families and children in the future. The bad news is that if governments do not immediately invest in children and youth, they will face several lost generations, with incalculable negative effects not just on wellbeing, but very importantly, on human capital and productivity. The countries’ economies will fall further behind.
The second challenge is the even tougher one: funding the new social contract through a new fiscal contract. As governments extended new emergency programs, they mostly did so on credit, kicking the difficult political decisions down the road. The money has mostly dried up, while the need for investments in children is larger than ever. Establishing sustainable sources of revenue can partially be addressed through more efficient and progressive expenditures. However, it fundamentally means expanding the tax base. Latin America as a region has a much lower tax base than other countries at similar levels of development, and Latin American elites are also notoriously good at skirting taxes. Yet the only path toward more sustainable and productive societies is when the economic and political elites can agree to collectively invest in the future of their countries.
Especially in the poorer countries, domestic elites won’t be able to do it alone, and these countries should receive multilateral assistance. The past year and a half have not only produced losers, but winners as well, and now that an international multilateral tax reform has been agreed upon, it is up to all of us to ensure that it is implemented and enforced in a way that benefits those who need it the most. And to do so before the next pandemic hits.
*This article was published in the LAV Magazin 2021.