Socioeconomic Impacts of COVID-19: Latin America and the Caribbean

Socioeconomic impacts of COVID-19 September 2020 Latin America and the Caribbean (Bolivia, Colombia, Ecuador, Guyana, Honduras, Peru and Suriname) City of Cuzco, Peru By Sara Awad and Alexandra Konn CESO gratefully acknowledges financial contributions from Global Affairs Canada SOCIOECONOMIC IMPACTS OF COVID-19 1 Foreword The COVID-19 pandemic currently represents the greatest challenge our world has faced since the Second World War. In less than a year, the pandemic has profoundly changed daily lives across the world, forcing the majority of people to adopt a new way of life both physically and mentally. The global spread of the virus has overwhelmed health systems and caused widespread social and economic disruption that will leave deep scars. This crisis is expected to hit developing countries disproportionately in the longer term. In May 2020, CESO’s Program Development and Learning team initiated this research to document the social and economic impacts of COVID-19 across a number of countries where CESO has ongoing initiatives. While the key goal of this report is to contribute to informed strategy development in CESO’s project AWE (Accelerating Women’s Empowerment) funded by Global Affairs Canada. The study may also provide useful insights to the general public, particularly: students, researchers, practitioners, business leaders and policy makers who are engaged or can potentially become more engaged in the area of international development. This report summarizes the social and economic impact of COVID-19 in Bolivia, Colombia, Ecuador, Guyana, Honduras, Peru and Suriname. Here, we explore the impact of the pandemic on gender equality, environment, agribusiness and tourism and hospitality. These all are key sectors and thematic areas where CESO aims to support people, businesses and other institutions to adapt, innovate and recover. This report is one of five publications that encapsulate the key findings of CESO's research on the impact of COVID-19 in twenty countries. An in-depth review and analysis of news, articles and journals published in international, regional and national publications forms the key pillar of this research. These findings have been triangulated and further elaborated with insights from AWE staff members and partners from across different countries. This research has involved the collection and adaptation of a depth of primary data with support of CESO staff members and partners from across different countries. The guidance from the management of CESO’s International Services team and technical specialists enabled the researchers to identify high priority practical areas to explore during the study. CESO appreciates the valuable advice from its expert volunteers who have supported the research in its critical milestones. Special thanks goes to the internship program at the Munk School of Global Affairs and Public Policy at the University of Toronto, which provided key support in research design, coordination and compilation. SOCIOECONOMIC IMPACTS OF COVID-19 2 Introduction The impact of COVID-19 on countries in Latin America and the Caribbean is primarily trade disruptions, international travel restrictions, and local government lockdowns and restrictions. Similar to African countries, COVID-19 arrived in Latin America and the Caribbean later than in North America and most countries in the region were quick to implement lockdowns and travel restrictions to mitigate the spread of the virus. However, COVID-19 has spread rapidly across countries despite these measures. Latin American countries have a large informal workforce; around half of all Colombia workers are in the informal sector, and this percentage is expected to increase as formal jobs disappear. This job loss mainly came from SMEs, which typically generate 70% of national employment. Throughout Latin America and the Caribbean, micro, small, and medium enterprises (MSMEs) are critical components of the economy and are expecting significant losses. The resulting loss of employment and livelihoods may reduce the purchasing power of households, leading to a potential rise in food insecurity. The economic impact on women will likely be greater due to their prevalence in the informal sector and in sectors most affected by the pandemic. In all countries in the Caribbean, UN Women reports that women are more concentrated in jobs that require face-to-face interaction and thus they face greater challenges from social distancing measures. Additionally, women face a higher care burden at home. This increased care load reduces the available time women have to devote to economic activities. COVID-19’s disproportionate effect on food supply chains presents an exceptional risk to the agribusiness sector in Latin America and the Caribbean. Movement restrictions and reduced demand for exports has affected the value chains in all seven of the Latin American and Caribbean countries participating in CESO’s AWE project. Movement restrictions have resulted in reduced incomes for farmers and producers who were unable to sell all of their harvests. Many producers have turned to e-commerce as a solution to these logistical issues, using apps and technology to strengthen their value chains and reach customers. This region also contains significant tourism-dependent economies. The shock of COVID-19 to the tourism sector in the Caribbean has “no precedent” in recent decades according to the Inter- American Development Bank (IDB). Significant decreases in employment is expected in this sector due to the COVID-19 pandemic. Given these losses, many in the sector are planning to pivot into more profitable sectors, such as agribusiness or personal protective equipment retail. The IDB calls the economic fallout from the COVID-19 pandemic “the region’s most severe economic challenge since the Great Depression,” and predicts persisting economic damage unless programs are implemented to offset these impacts. The governments of the seven AWE countries have implemented their own various measures to mitigate some of these socio-economic impacts. SOCIOECONOMIC IMPACTS OF COVID-19 3 Bolivia n Bolivia, the impact on the economy from trade disruptions, international travel restrictions, Iand local lockdown and restrictions have impacted the incomes and livelihoods of both formal and informal workers. The decline in GDP growth caused by the pandemic has halted many sectors, including exports, agro-industries, raw materials production, and construction. The high amount of informal work in Bolivia makes the economy especially vulnerable to any decreases in economic activity. Informal workers typically lack job security, employment benefits, severance, have an average lower pay, and reduced savings. Thus, it is not surprising that the proportion of informal workers in a household decreases as income distribution rises. The impact on the poor will be significantly greater as they will be more likely to lose their source of income and have little resources to sustain themselves. CESO’s Country Representative in Bolivia reports that a decline in remittances began in the first two months of 2020, and had a negative impact on family incomes. As for businesses, many have been affected with retail stores and restaurants closing, resulting in a rise in the unemployment and underemployment rate. Formal employment has been particularly impacted. As a consequence of this decrease in employment, families have had to reduce consumption. However, many have also adapted. For example, restaurants have pivoted to food delivery services while groceries and street food sales have increased. The percentage of workers in the informal sector is also expected to increase from 60% to 70%. Since many people do not have consistent access to technology, e- commerce sales have not increased as much as they have in other countries. In a survey conducted by the National Chamber of Commerce on entrepreneurs during COVID-19, it was revealed that 6 out of 10 experienced a reduction in income greater than 70%; 17% reported having to shut down operations; and 9 out of 10 tourism companies reported generating no income at all as a result of the lockdown. For most of these entrepreneurs, the loss of liquidity is the biggest problem as they are unable to pay their employees or rent. Micro, Small and Medium Enterprises (MSMEs) have been particularly affected in Bolivia. Making up over 90% of the country’s enterprises and generating 85% of national employment, MSMEs are a critical part of Bolivia’s economy. Mostly operating in the domestic market, many business owners have experienced reduced economic activity and an inability to repay their loans due to lockdowns and restrictions put in place. MSME owners marched in the streets on June to demand SOCIOECONOMIC IMPACTS OF COVID-19 4 the government provide them support to keep their businesses afloat. Some of their demands included that their businesses be freed from the lockdown limitations, and that their credit payments be deferred. These businesses are at greater risk of disappearing as the economic impacts of COVID-19 continue to unfold. To adapt to the new environment, some MSMEs in garment manufacturing have started producing face masks. Agribusiness MSMEs have seen a reduction in their operations as a result of restrictions, but they continue to produce and process goods. Service- providing MSMEs, such as transport and constructions, started a gradual reopening in August 2020. For all these enterprises, however, innovation and adaptation will be needed to survive in the

Load more