One of the keys to overcoming the economic onslaught caused by the Covid-19 pandemic in the Latin American and Caribbean region is investment, said Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) during a virtual forum for the presentation of a report prepared by the organization.
“Our region is at a very low level of investment. We are at an average 17.6% with respect to GDP, and the world average is 26.2 percent. The average for emerging countries is 36 percent. The region has to advance at least 9 percentage points to reach the desired investment, “he said during the conference in which Iván Duque, president of Colombia, and Guillermo Lasso, president of Ecuador also participated.
The World Bank recommends that governments allocate at least 4.5% of their Gross Domestic Product (GDP) to public investment. However, Mexico averaged 3.3% of the Product between 2015 and 2021, according to calculations by the Center for Economic and Budgetary Research (CIEP).
According to the study “Latin American Economic Outlook (LEO) 2021: Moving together towards a better recovery” – which was prepared in conjunction with the Development Center of the Organization for Economic Cooperation and Development (OECD), the Bank of Development of Latin America and the European Commission -, the region had a contraction of almost 7.0% in 2020 and it is expected to recover the levels of GDP per capita prior to the crisis until 2023 or 2024.
In a separate event, Alberto González Pandiella, the OECD analyst for Mexico, agreed with Bárcena. In a virtual conference on Wednesday, he said that the priority of the Mexican government to prop up economic growth should be investment, an area that had already been hit since before the outbreak of the Covid-19 pandemic.
“To strengthen the recovery, we see it as essential to start the investment engine that had already been weakened before the pandemic. Without starting the investment engine it will be difficult to achieve high growth rates, “he said in a remote conference with the media.
The ECLAC report also revealed that social inequalities in the region were accentuated because social protection mechanisms are insufficient due to the high prevalence of informal work, a condition in which 50% of workers find themselves.
“Moving towards universal social protection systems is essential to protect those most in need in the post-pandemic context,” said the specialists.
Growth for LA will be anemic: OECD
The economic recovery in Latin America is occurring in an accelerated way at the moment due to a rebound effect, but growth will be anemic at least for the next two years, OECD experts explained in their report “The return to anemic growth in Latin America: A motivation for a new beginning? ”.
Economic activity in the region returned to the path of recovery in the second half of 2020.
“Compared with our projection for June, the growth forecast for 2021 for six of the large economies of Latin America (Argentina, Brazil, Chile, Colombia, Costa Rica and Mexico), which represent 85% of the region’s GDP, it has been revised upwards to 6.5 percent ”, they said.
The previous expectation was 5.9 percent.
However, economies will slow down in the next two years with an average anemic growth of 2.7% by 2022 and 2.3% in 2023.
For Mexico, the OECD forecasts a growth of 5.9% in 2021; 3.3% in 2022 and 2.5% in 2023.
Regional tax reforms, on the doorstep
Iván Duque, president of Colombia, said that his country has anticipated a tax reform that will allow it to collect 1.8% of GDP. “We are the country in the hemisphere that has made the most profound fiscal reform in the midst of this crisis,” he said.
Reference-www.eleconomista.com.mx