World Bank: The “worrying economic exclusions” behind the rebound in the economies of Mexico and Colombia | Economy

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Mark Thomas has been the director of the World Bank (WB) for Mexico, Colombia and Venezuela since August 2021. Photo courtesy of the WB.
Mark Thomas has been the director of the World Bank (WB) for Mexico, Colombia and Venezuela since August 2021. Photo courtesy of the WB.Jessica Belmont

Behind the figures that paint an economic recovery persist inequalities and exclusions that precede – and were exacerbated by – Covid-19. For Mark Thomas, director of the World Bank (WB) for Colombia, Mexico and Venezuela, governments can take advantage of the inertia generated by the pandemic to design new public policies that solve these problems. Thomas, who was appointed to that position in August, urges qualifying the growth figures for gross domestic product (GDP) to make visible the harsh realities that the data does not portray.

With a doctorate in economics from Princeton University, Thomas worked in Brazil and Turkey prior to his arrival in Mexico City, from where he supervises the operations of the multilateral in that country and in Colombia. Despite the fact that Venezuela is a member country of the World Bank, the organization has not operated there since 2007, when President Hugo Chávez requested his departure. The bank offers its member countries technical advice, financing for certain projects and support in the design of public policies. This year, for example, Thomas and his team implemented a rapid financing program to help the Colombian government register and integrate into the country some 1.7 million Venezuelans who now live in the neighboring country.

In an interview with EL PAÍS, Thomas speaks with concern about the impact that the pandemic has on women, indigenous people and those with disabilities.

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Question. What is your medium-term outlook for Mexico and Colombia?

Answer. Before talking about the future, let’s talk about the present. Measured by the impact on health or the economy, the Latin American region is the most affected by the pandemic in the world. The impact on income, employment, school participation and other levels relevant to households has been severe. Both countries, Colombia and Mexico, are emerging from a severe recession. Both countries also had pre-existing conditions, to put it in medical terminology, which are: low productivity growth and high inequality, the latter had aspects of social exclusion and intergenerational transmission that give it historical proportions. What we can say is that the pandemic exacerbated both. The pandemic created obstacles against growth and economic recovery, but it also had differentiated impacts, as in developed countries, increasing inequality.

As an example are the effects on children’s educational attainment, which have been more severe among lower-income families. Therefore, you have that the impacts are different through income distribution, through the vulnerability of groups, indigenous people, Afro-descendants and among those who suffer from a disability. All of these inequities have been made worse by the pandemic. Speaking of the future, both economies are expected to return to the levels of activity they were at before the pandemic, measured by GDP. That’s true of macroeconomic numbers, and it’s partially true of unemployment numbers. However, this is not correct when you analyze the long-term and distributional impact of the pandemic. The composition of employment has changed, there has been a shift from formal to informal employment. People have left the labor market and this exit has a gender component. Most of the people who have left their jobs have been women and that is probably related to the fact that the pandemic is not over. Many of the difficulties for households due to covid-19 still persist, despite the advances in vaccination that we have seen. At the country level, if you compare Colombia with Mexico, Colombia had a 6.8% drop in GDP, slightly less than the 8.3% in Mexico. Colombia is seeing a faster rebound than Mexico. We estimate that Colombia will grow 7.7% this year and Mexico 5.7%. In 2022 and 2023 we expect growth of 4% in Colombia and between 2 and 3% per year in Mexico. The important thing, I think, is that underneath these macroeconomic numbers that suggest a recovery, there are microeconomic issues of human capital distribution that will not be recovered or resolved as quickly and that present a public policy challenge for governments.

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P. In Mexico, the reforms proposed by the government are also obstacles to investment, and therefore, to growth.

R. Both Mexico and Colombia are coming out of a difficult period and what I would say is that the challenge for Mexico is to take advantage of opportunities to grow and, at the same time, Mexico must ensure that growth is inclusive and does not increase inequality in the country . There are changes occurring globally that represent opportunities, changes in supply chains, in efforts to mitigate climate change and in the structure of export markets, as we move towards an economy with a lower carbon footprint. These changes represent opportunities for Mexico and Colombia. The proximity of Mexico to the United States is one of these opportunities. The fact that Colombia has one of the highest biodiversity indices in the world is an opportunity for them is another and the country is implementing policies to take advantage of these resources and protect them at the same time.

P. We are approaching the end of the year. Beyond the economic outlook, what are your wishes for Mexico and Colombia in the coming year?

R. My hope is that what has been difficult this year and because of the pandemic will give inertia to the debates on public policies and reforms. That countries take advantage of new opportunities. That they break the cycle of what have been challenges of historic proportions that these countries have struggled to break, specifically that of structural inequalities.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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