This year, the economies of Latin America and the Caribbean will grow an average of 6%, according to an estimate by the Organization for Economic Cooperation and Development (OECD). In addition, the evolution of the covid-19 pandemic will continue to determine the behavior of the economy. The authors of a report published this Thursday by several multilateral organizations expect growth to be slower in 2022 and assure that the structural problems of the countries in the region have now become more urgent, including the expiration of a social contract that has to the discontented and distrustful population.

The OECD published together with the Development Bank of Latin America (CAF), the European Commission and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) an annual report with economic perspectives in which specialists assure that Latin America It faces four development “traps” that precede the pandemic and that must be tackled to improve the quality of life and well-being of citizens. In his view, low productivity, inequality, weak institutions and the threat to environmental sustainability are impediments to inclusive economic growth. Despite the quickest measures to respond to the pandemic, Latin America has been the most affected region in the world in socio-economic terms. The region’s per capita gross domestic product will not return to pre-pandemic levels until 2023 or 2024.

“The pandemic hit Latin America and the Caribbean at a time when the region was already facing the deep development traps identified since 2019,” says the 270-page report. “The post-covid-19 context should be seized as a unique opportunity to adopt a multidimensional development strategy and redefine national policies by building consensus among citizens and implementing pending reforms necessary to drive recovery,” he adds. .

The growth seen in many countries in the region this year is due not only to the statistical rebound in comparison when considering the brutal fall in gross domestic product (GDP) in 2020, it is also due to the positive effects of external demand and the rise in the price of raw materials exported by the region, as well as increases in demand. “The scenario for the remainder of 2021 and for 2022 is subject to the evolution of the pandemic, and the rise of the delta variant, the deployment of the vaccine and public discontent that has resulted in social protests in some countries,” he says the report finalized before the omicron strain was identified.

“The main engine of growth in the short term will be domestic demand, particularly consumption, since mobility restrictions are removed, allowing services to resume. In addition, a full political cycle in the region, with presidential and / or legislative elections between the second half of 2021 and the end of 2022 in Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Mexico and Peru, weigh on expectations and could keep investment moderate, “say the multilaterals.

The report emphasizes the social unrest that certain Latin American countries are experiencing, as a result of inequality, the lack of quality public services and mistrust in institutions. “Social unrest continues to be a key factor affecting economic stability. Recent social protests highlight the need to achieve a more inclusive growth model, improve the well-being of citizens and generate consensus among citizens in a renewed social contract ”, point out the specialists.

The OECD and the rest of the organizations that sign the document, urge to implement effective and equitable vaccination strategies as a short-term measure to promote economic recovery. In the medium term, governments must implement policies that improve productivity, such as, for example, promoting digital technologies to open the range of job opportunities. The multilaterals also included a whole chapter on the expiration of the current social contract, which refers to the implicit agreement between the State and its citizens regarding their rights and obligations.

“The renewal of the social contract may involve the conclusion of several pacts in specific policy areas (for example, a fiscal pact) and the creation of broad support among the various stakeholders (for example, government, civil society, unions, the private sector) ”, assure the organizations in the document. “Achieving fair, legitimate and stable deals will require engaging in open and inclusive policy-making processes and applying strong policies of public integrity to avoid the risk of powerful elites taking over policies. Paying attention to the political economy of the reform will be essential to reach stable and lasting agreements ”, they add.

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