The impact of the coronavirus in Latin America´s future

Disclaimer: Views expressed in this commentary are those of the staff member. This commentary is independent of specific national or political interests. Views expressed do not necessarily represent the institutional position of International IDEA, its Board of Advisers or its Council of Member States.

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In articles early this year (“Tiempos Nublados para América Latina,” La Nación, January 11, 2020; “Democracia Asediada,” Wall Street Magazine, January 30, 2020) we warned that Latin America should prepare for a 2020 just as convulsed if not more so than 2019. That prognosis⁠—pessimistic at the time⁠—was brutally overtaken with the arrival of COVID-19, a pandemic that is now making the situation much more complex, turbulent, and unstable. Our previous analysis was based on a main premise: we were living in a world undergoing gradual changes. Yet in just a few weeks this assumption collapsed, and we now find ourselves in a period characterized by a huge disruption that is difficult to grasp, let alone project.

The COVID-19, which first appeared in Asia (more specifically in Wuhan, the capital of Hubei province, China), and whose epicenter at this moment is Europe, is already having a major impact in the United States and is quickly spreading in Latin America. At this time the United States has the largest number of persons infected, with numbers that are now rising exponentially. According to the White House, the United States will probably end up seeing “millions of cases” and from “100,000 to 240,000 deaths,” (El País, April 1, 2020).

The Americas, which currently account for more than 30 per cent of coronavirus cases worldwide, have gradually been moving towards confinement, or “stay home” mode, closing borders and slowing down economic activity. But the worst has yet to come for Latin America. In coming weeks and months the coronavirus will hit us with a ferocity on many fronts. It is a disruption that extends from health care to the economy and to the financial system, from the national to the global scene, and, to top it off, in the midst of accelerating climate change.

The effects on the economy, both globally and regionally, will be devastating since it is a crisis that affects both supply and demand. Moreover, unlike previous crises, this crisis is characterized by a high degree of uncertainty (as to its impact and duration), which makes it very difficult to make prognoses and outline plausible scenarios.

The economic and financial situation in Latin America will continue to deteriorate rapidly. According to the Economic Commission for Latin America and the Caribbean (ECLAC), average growth in Latin America will fall 1.8 per cent. Other projections are more pessimistic. Goldman Sachs anticipates a 3.8 per cent contraction and the Economist Intelligence Unit forecasts a decline of 4.8 per cent. If these figures are confirmed it would be the most profound recession that the region will have suffered since the Second World War. Nonetheless, these projections may be adjusted, depending on how the pandemic and global recession unfold in the region.

The two largest regional economies will suffer major impacts, while the third largest, Argentina, is facing an extremely complex situation that could increase the possibilities of a default. Goldman Sachs projects that Brazil will contract 3.4 per cent, Mexico 4.3 per cent and Argentina 5.4 per cent. The Chilean economy also faces a very complicated outlook, with projected 3 per cent decline.

Consumption will undergo a major contraction. Raw materials prices have already plummeted. Tourism and trade will also be impacted. The stock markets have suffered major losses, Latin American currencies have depreciated vis-à-vis the dollar, and capital has begun to flee the region. In the last two months Brazil has seen almost 12 billion dollars transferred abroad.

Unemployment will grow as will the number of families living below the poverty line. According to recent estimates of ECLAC (March 2020), poverty will increase from 185 million to 220 million, extreme poverty will climb from 77.4 million to 90.7 million persons, and unemployment will rise to 10 per cent, while progress in reducing inequality will continue to be stagnant or even suffer rollbacks in some countries.

At the global level the news is equally concerning. The IMF just announced (in March) that the world economy has entered a recession as a result of the drastic measures adopt to limit the spread of the coronavirus. Its director, Kristalina Georgieva, said that the recovery in 2021 will depend on whether the virus can be contained and whether one can keep liquidity problems from becoming solvency problems.

This recession could in turn provoke massive bankruptcies of companies, a major increase in unemployment, and an acute financial crisis. The estimate of the International Labor Organization (ILO), which just a few weeks ago indicated that up to 25 million persons could end up without work, and that the loss of labor income could come to US$3.4 trillion, is now outdated due to the depth and speed of the crisis, according to its director, Guy Ryder (Guy Ryder, “La fragilidad de las economías”, El País, March 28, 2020). In the United States the Federal Reserve Bank of St. Louis warns that unemployment could rise to figures from 10 per cent to 40 per cent. If these projections are confirmed, in the United States alone 50 million jobs could be lost (La Tercera, Rodrigo Cárdenas, March 26, 2020).

In view of the foregoing, and as noted by Harvard economist Carmen Reinhart: “This time [the crisis] truly is different” considering that ever since the 1930s, the advanced and emerging economies had not experienced the lethal combination of a fall in global trade, depressed global raw materials prices, and a synchronized economic recession (Carmen Reinhart, “This Time Truly is Different,” Project Syndicate, March 23, 2020). This is the perfect storm that all countries must avoid.

The closing of borders, which is necessary for public health efforts, not only has negative economic consequences, but is also giving rise to frictions between some countries and could awaken xenophobic sentiment, further weakening the fragile regional integration. The projections of contagion and lethality are difficult to nail down.

For the time being the restrictions imposed by governments to address the pandemic appear to have put social protests in quarantine as well. However, this possibility should be analyzed cautiously. In the short term the lack of income due to forced unemployment may cause hunger, violent reactions, and an increase in political tensions in certain countries of the region. And in the long term, so long as the main causes giving rise to mass protests are not resolved, it is very likely that they will return or even intensify once the pandemic is behind us.

Differences in reactions among Latin American Countries

While it’s one and the same virus, the Latin American states are not all the same. Nor have the governments of the region adopted a uniform response to the pandemic. Some have acted in timely fashion from the outset. Othershave responded haphazardly, with worrisome delays. One final group includes three presidents who minimized the danger of the coronavirus. In Mexico AMLO said: “you must embrace one another, nothing is going to happen with the coronavirus,” though in the last few days he has been accepting the need to put restrictive measures in place, among them shutting down the government, suspending all non-essential activities, and the recommendation to stay home. In Brazil, Bolsonaro continues trivializing the crisis. He recently said: “We have to end this crisis of hysteria. Brazil is not going to stop…. Some are going to die. I regret it. That’s life.” And in Nicaragua Ortega organized a march under the slogan “Love in the times of COVID-19” and, for the time being, continues underestimating it⁠—even though by late March Nicaragua had seen its first death associated with the coronavirus⁠—and handling the information without much transparency, and with censorship and secrecy. 

This coronavirus pandemic is a litmus test for Latin American leadership. Poor management of the pandemic could end up having very serious political consequences for the presidents and for democracy. Yet at the same time, in those countries in which the response has been correct and timely, the presidents see their levels of support rising (Vizcarra in Peru and Bukele in El Salvador, to cite just two examples). In a second group of countries the measures adopted by the presidents have helped reduce the degree of polarization and facilitate agreements between the government and the opposition, which until recently had seemed impossible to achieve (Fernández and the opposition in Argentina). And in a third group the pandemic could offer the governments⁠—if they act effectively and sensibly⁠—an opportunity to overcome the social and political crises they face, reconnect with the citizenry, seek agreements, and change programs (Piñera in Chile). Obviously, all these assessments can change quickly.

The consequences will also be important for the relationship between the state and the market. The state will emerge from this pandemic strengthened. As per the wise counsel of Francis Fukuyama, one must avoid the false debate as to which regime is more effective for controlling the pandemic, i.e. authoritarian or democratic regimes, since “[t]he crucial determinant in performance will not be the type of regime, but the state’s capacity and, above all, trust in government.” (Francis Fukuyama, “The Thing that Determines a Country’s Resistance to the Coronavirus,” The Atlantic, March 30, 2020).

Accordingly, there will be more demand for a stronger state, fiscally sound, agile and effective when it comes to delivering services and offering guarantees to address the growing social demand (with the capacity to deliver); and there will be demands for a more transparent state that is accountable to its citizens. Efforts should focus on organizing a strategic state, one that convenes and gives direction to the joint action of social organizations, businesses, and universities. The state should have the capabilities to provide quality public services, innovate, implement new public-private partnerships, and promote a change in the productive structure to address climate change.

Another aspect that calls for attention is the role of the military and security forces as well as the full set of measures that governments have been adopting – curfews, states of emergency, restrictions on the freedoms of movement and assembly, among others – and the impact they could end up having on human rights. While at this time many of these measures are justified, they must be implemented with great care and legislative oversight to avoid any type of abuse and to ensure that such measures are immediately halted once the situation returns to normal. Fighting COVID-19 does not justify, in any case, unlimited emergency powers free from any checks.

It is equally important to guarantee that these emergency measures, combined with greater concentration of power in the hands of executives and a high level of public spending, not bring about a weakening in the oversight mechanisms and bodies established to ensure transparency and integrity, and, consequently, an increase in corruption. While the Latin American experiences with the decentralization of the use of public resources revealed an increase in the risks of corruption, the massive use of personalized cash transfers to provide basic income to a large percentage of the population will require strict oversight. In this regard, it will be necessary to take action in relation to specific persons and businesses, which may lead to discrimination and the use of undue influences. Therefore, in order to legitimate this pressing humanitarian action, the whole public apparatus, and especially the oversight bodies and mechanisms, should be ready to try to avoid possible diversion of public resources. To this end it is essential to strengthen transparency and accountability, as well as the role of the media and the supervision of civil society organizations. Done right, such efforts will help establish new instruments for social inclusion and for reducing inequality in the stage that will follow the pandemic.

In Latin America, with so many experiences of hyper-presidentialism and abuse of power, we must be vigilant to ensure that during this crisis citizens’ fears are not manipulated by leaders with a strong authoritarian appetite. While at the origin of the Hobbesian state humankind was prepared to sacrifice its freedom for security, it would appear that in the face of the coronavirus humankind is willing to sacrifice part of its liberty and privacy for better health. Yet as Yuval Harari points out, getting citizens to choose between privacy and security is to pose a false dichotomy. And he adds, “We can choose to protect our health and stop the coronavirus epidemic not by instituting regimes with totalitarian surveillance, but by educating and empowering citizens.” The solution does not involve establishing an authoritarian regime. To the contrary, we must “rebuild trust in science, in the media, in the institutions, and in the public authorities” (Yuval Noah Harari, “The World after the Coronavirus,” Financial Times, March 20, 2020).

The coronavirus has also impacted the normal development of the electoral calendar in Latin America in coming months. Paraguay was the first to postpone elections, particularly the internal political party elections and the municipal elections. Chile postponed the constitutional plebiscite from April 26 to October 25. Uruguay is intending to do likewise with its municipal elections, now scheduled for May 10. In Bolivia the electoral court has said that the presidential and congressional elections that were planned for May 3 will be held at a later date⁠—in principle sometime between June and September⁠—but without yet setting a new date. By way of contrast, the Dominican Republic, so far, has kept May 17 as the date of its presidential and legislative elections.

Risks of polarization and support for multilateralism

Another angle that should be analyzed is the geopolitical clash being waged by the United States and China in relation to COVID-19 and its impact on Latin America. In the pre-coronavirus world there were already major tensions, which the pandemic has exacerbated. The post-coronavirus world will be accompanied by a major geopolitical reconfiguration that could usher in a new world order. As Carl Bildt, former prime minister of Sweden says; “This is the first great crisis of the post-American world” and its consequences are not yet clear. If at the beginning of this pandemic it was thought that it would weaken China vis-à-vis the United States, today it seems that the opposite may turn out to be the case. Both scenarios are now possible.

The COVID-19, which as we said at the outset originated in China, opened up a new chapter of mutual accusations and confrontation in the China-US cold war, on top of the trade and technological war (5G) between the two superpowers.

Both are also competing in their effort to show the rest of the world not only who is more effective when it comes to dealing with the pandemic, but also in relation to the production of a vaccine to fight the virus. It is reminiscent of the space race, in the midst of the cold war, between the United States and the former Soviet Union in the 20th century.

Efforts must be made to keep this confrontation from impeding or obstructing, at this very critical moment, the implementation of the urgent and necessary international coordination and cooperation, as occurred at the March 2020 G7 meeting, where it was not possible to adopt a final declaration since the United States insisted on including the term “Wuhan virus,” an initiative that was not supported by the other member countries. Trump’s re-election effort requires, first, blaming China for the pandemic, so as to dissimulate his own chaotic management of it; and second, trying to reopen the economy as soon as possible to mitigate the impact that the recession and high unemployment have may on his image.

In recent days there were some encouraging signs, among them a conversation between Trump and Xi with the objective of overcoming the differences and furthering cooperation in the struggle against the pandemic. Let us hope that this cooperation will grow stronger. Humankind desperately needs it.

In addition, and unlike previous crises (Ebola, the 2008-2009 financial crash), the United States has not exercised its leadership to coordinate a global response to the pandemic. To the contrary Trump⁠—who has acted erratically in response to the pandemic⁠—guided by his “America First” mantra, has focused on fighting the coronavirus within the United States with the objective of keeping it from dooming his hopes of winning reelection.

Trump’s lack of leadership and solidarity is occurring not only globally but also in our region. Except for the agreement with López Obrador to keep the borders between the two countries open, for the time being, and his meetings with Bolsonaro in Miami, and with Duque in Washington⁠—in which there was little discussion of the coronavirus⁠—until now there has been no large-scale US plan aimed at helping the region fight the coronavirus. This lack of initiative and solidarity on the part of the United States, if it continues, could open the door to China, if it knows how to take advantage of the situation, and expand its presence and initiative and develop closer ties with several countries of the region.

Yet what may well have adverse results internationally and regionally appears to be working for Trump, for the time being, domestically. His approval ratings (according to a Gallup poll from this week) have gone back up to 49 per cent, the same level he had reached after being acquitted in the impeachment trial. As between helping to save the world or our region from the coronavirus and saving his presidency, everything appears to indicate that Trump has opted for the latter.

There’s no time to lose

The world has never faced a crisis of this magnitude that puts not only governments and health systems under immense stress, but also the economy, employment, and our habits when it comes to day-to-day life and coexistence with others. We are experiencing one of the most disruptive phenomena in our history. As Yuval Harari sees it, we have entered “a historical wormhole,” i.e. a moment in which “the normal laws of history are suspended’; in other words, in a matter of weeks “what was impossible became ordinary” (Yuval Noah Harari, “La crisis del COVID-19 se perfila como el momento decisivo de nuestra era”, LT Tendencias, La Tercera, March 28, 2020).

For our region it is a colossal challenge due to the lethal combination of weak states and fragile health systems, with high levels of poverty, inequality, and informality. Broad sectors of the population who are self-employed (53 per cent), who lack unemployment insurance (in place in only six countries of the region), and who don’t have health insurance (43 per cent of the population) are very vulnerable to the pandemic and will certainly experience very tough times.

Latin America combines advantages and vulnerabilities when it comes to addressing COVID-19. Among the first, we should take advantage of the late arrival of the virus in our region to adopt good practices from other countries and avoid making the same mistakes. With respect to the second, of particular note are weak states, fragile health systems, limited public budgets, mediocre economic growth, and societies with high levels of poverty, inequality, and informality.

Exceptional moments call for exceptional responses

In the face of this unprecedented and serious pandemic, the governments should urgently adopt measures to contain the virus, not just to mitigate it, to try to impede exponential growth in the number of persons infected⁠—flatten the curve⁠—and avoid a collapse of health care services.

Similarly, governments will be forced to implement countercyclical economic policies, inject large sums of money, and implement huge fiscal programs to support persons, households, and businesses with the aim of staving off an uncontrollable chain of bankruptcies and layoffs.

The priority of this “crisis with no one to blame” (“crisis sin culpables”), as Nora Lustig has correctly called it, are persons. Hence the importance of reducing as much as possible the number of deaths, at the same time avoiding, to the extent possible, a devastating economic, financial, and social crisis. In this connection, the measures that various governments have begun to apply, both in and outside the region⁠—according to The Economist, the average stimulus package of the main economies worldwide is close to 20 per cent of their GDP⁠—should be accompanied by financial support from the multilateral financial institutions that is both abundant and flexible, and by greater coordination among countries. The crisis calls for acting simultaneously locally and globally. To quote Moisés Naím: “It is necessary to act both locally at the most individual level possible as well as globally at the most multilateral level possible.” And he adds: “In the crisis we are experiencing, individual isolation saves lives. Yet isolation among countries will result in the costs of the crisis being even greater” (Moisés Naím, “Sin precedente,” El País, March 29, 2020).

And, in the specific case of Latin America there is a need, as Rebeca Grynspan Mayufis recommends, for “immediate and flexible lines of credit from the development banks and rules of the game that enable them to take the necessary and sufficient measures to adequately protect their populations and their economies” (“La crisis económica y su respuesta”, El País, March 29, 2020). Unfortunately, until now regional coordination and cooperation have been quite limited except for the virtual presidential summit of PROSUR, some measures implemented by the Pan American Health Organization, and certain initiatives adopted in the context of the Central American Integration System (SICA)⁠—too little to deal with such a pandemic.

A global pandemic demands answers and solutions that are also global. We need global leadership that is up to the challenge we face and a global action plan, but this has yet to happen.

Unfortunately, as Ian Bremmer points out, the world is not prepared to confront the first real crisis in our current era of G-Zero politics. In the words of the president of the Eurasia Group: “The era of ‘my nation first’ politics is also that of ‘my nation first’ responses to the greatest global health crisis the world has seen in recent history” (Ian Bremmer, “La primera crisis global en la era del G-Cero,” La Tercera, April 1, 2020).

The solution to this crisis does not include isolationist nationalist responses but rather greater global coordination accompanied by a renewed and strengthened international multilateral architecture with the capacity to confront the challenges of the 21st century.

There is an urgent need to implement a coordinated international response. Yet for that to happen the main states must lead this process, as happened in previous crises.

The March 26 meeting of the G20 is a step in the right direction. So is the recent conversation between Trump and Xi. Yet to address this very serious pandemic much more cooperation and solidarity are needed, both within the region and inter-regionally. As Martin Wolf notes, “Any global order rests on cooperation among powerful states. China and the US must not only function. They must function together, recognising the many interests they share, while tolerating their deep differences” (Martín Wolf, “The tragedy of two failing superpowers”, Financial Times, April 1, 2020). This is the level of maturity and responsibility that is needed from the leadership of both countries.

But let’s be clear. COVID-19 is not only a challenge for governments but also for society as a whole and for each of us as individuals. Governments cannot win this battle alone. As Martin Wolf has noted, in addition to its health and economic consequences this crisis poses major ethical challenges, both individual and collective.

How to strengthen democracy

The effects on democracy will not be uniform either. While in some countries the poor handling of the crisis could facilitate the coming to power of new authoritarian populist leaders, in others it could produce a weakening of populist leaders who are already in power, as it makes their incapacity and irresponsibility readily apparent. It is necessary to keep authoritarian leaders from coming to power, and to keep those who already are in government from consolidating their power. We should do the utmost to keep democracy from becoming one more victim of the coronavirus.

This crisis will push societies to demand strong policies for social inclusion. History shows that after wars and catastrophes inequality has been fought resolutely. Stanford historian Walter Scheidel has indicated that “only catastrophic plagues and wars have ever prompted societies in the past to fundamentally address social inequality” (The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, 2018).

Its magnitude will unleash great pressure for an overhaul of the public health system. The vulnerability of the elderly makes an overhaul of the pension system all the more urgent. It also makes it that much more important to end overcrowding and to provide universal basic services, prioritizing the poorest of the poor.

The pandemic will increase the priority accorded to social protection. The speeding up of digitization will destroy old jobs and create new ones. Countries will have to put in place a major plan for digital literacy and education. The so-called “digital dividend,” the result of a boost in productivity due to digitization, should be distributed and universal basic income should gradually be established. This crisis is also showing us the possibility of reducing CO2 emissions, consuming fewer superfluous and conspicuous goods, recycling, and using fewer resources.

The change in values and behavior will also accelerate. And it could constitute a hopeful scenario, in which individualism subsides and solidarity flourishes. Our behavior, characterized by responsibility and solidarity, is an essential factor for helping to defeat this pandemic. As Albert Camus says in The Plague, “… what we learn in a time of pestilence [is] that there are more things to admire in men than to despise.”

Democracy will be threatened. We must be watchful to avoid the return to authoritarian forms of government or anomie. Fear and vulnerability may predispose people to trade liberty for security. The expansion of digitization, the personal measurement of health indicators, the monitoring and traceability of each person, and direct government support for unemployed and poor persons so they can survive may open the way to hitherto unknown systems for surveillance and social control. Armed forces supervising quarantines and curfews may become commonplace. There is a risk of authoritarianism and social control. 

It is equally appropriate to ask ourselves: What effects might the pandemic have on the future of democracy in countries with hybrid or authoritarian regimes? What might the impact of the coronavirus be in Venezuela, Nicaragua, or Cuba? As we see it, two situations could arise, both with the justification of having a greater capacity to resolve the health and economic problems. The first is greater willingness of these regimes to reach broad agreements with the opposition and social organizations to address the pandemic, which could open the door to moving forward gradually in a democratic transition. The second is an authoritarian delirium to concentrate greater power. Which path a given country takes will depend on the strength of the opposition and civil society in each case. There are obviously greater chances of reaching agreements in those countries in which there is a well-organized opposition that also enjoys clear international support. To the contrary, when the opposition is disorganized or weak what little democratic space exists can be stifled even more.

Summarizing: COVID-19 will cause suffering, but it will also make possible institutional reforms that expand citizen participation and social dialogue, that empower persons, that correct inequalities, and that give impetus to innovation and education, to recover growth. The pandemic will also help carry out a profound review of our conceptions of democracy and our practices of government (Daniel Innerarity, “Una teoría de la democracia compleja: Gobernar en el siglo XXI”, 2020) so as to update them and endow them with new tools that make it possible to govern the complex societies of the 21st century democratically and effectively. A transformative opportunity will open up to attain a better democracy and contain the risk of new authoritarianisms and to go forward in a new-generation democracy, marked by better quality and greater resilience, and with strengthened democratic governance. 

It will depend on us, on national and international collaboration, on political leadership, and on the vitality of civil society.