How deep has the pandemic’s impact been on the regional economy?
Very deep and that has been one of our main concerns, because 2020 ended with the worst growth figures in a century. The drop in GDP was 6.5%. The countries that depend on tourism even saw drops of up to 20% and that translated into a very large drop in income, in unemployment. That impact hits poor families much harder. Many families have had to sell their assets, use what little savings they had and go to work, despite sanitary regulations in the harshest moments of the pandemic. In some countries we have seen an increase in hunger and malnutrition. That is worrying and we haven’t seen it in a long time. The fall has been very dramatic and we are also concerned that it is not only a blow to poor and vulnerable people, but it has also been a very big blow to the middle class.
How strong was the blow to the middle class?
Very big. We had seen with great satisfaction a gradual and gradual growth of the middle class for 20 years and we had celebrated, four years ago, that the region’s middle class had become the class with the largest number of people, but, unfortunately, the figures that we have in the last 18 months reveal that it has again fallen. Now the ruling class is the vulnerable and many people have fallen below the poverty line. This is a cause for serious concern, but the last three months we have begun to see a recovery in most countries helped by the prices of basic products or ‘commodities’, especially those for exports. This is accompanied by the important and strong rebound of the North American and Chinese economies, they are the two great engines that have ignited. This, fortunately, generates a positive situation for the countries of the region.
Will the momentum of the United States and China be permanent?
We see it as a permanent rebound in both countries. In China, led by the early success of ending the virus with drastic measures, more linked to restrictions on the arrival of travelers. In the United States it has more to do with vaccination. I am optimistic that it will be a slightly better year. We had bad years, before the covid, of low growth and with a stagnation in social and inequality figures. We hope that countries will seize this opportunity to take action, make energetic reforms that facilitate a resurgence of the economy that is more inclusive and sustainable, in terms of the environment.
What to focus these reforms on?
The countries that get ahead are those that have a medium and long-term vision, a certain macroeconomic and policy stability, manageable debt, efficient public spending and public investments. These are lessons that countries have been applying, but there are new things.
As which?
The first, in the short term, is the vaccination plan; It is important to improve health systems and especially prevention and response to this type of pandemic. Another medium and long-term issue, and one that we had not seen so clearly before, is digital. In the pandemic, it became very evident that those who have access to the Internet, to work or online education, to telemedicine have advantages, but in Latin America only almost half of the population has access to the Internet and there we see inequalities. Another issue is education, on which we took a somewhat dramatic study a couple of months ago, which indicates that more than a year and a half have been lost in education in most countries. Those who have been able to stay in some online education system are the people with the highest income. Therefore, it is essential to recover what was lost and to reopen the schools with all the protocols. It will be important to invest in plans for children to make up for lost time. It is a loss of human capital that, if not compensated, will have an impact for the rest of their lives.
At the end of 2020, it was anticipated that the post-pandemic would be uncertain, uneven and at different rates in the countries. Is this already being seen?
We are going to see many rhythms in the region, although unfortunate I think that what we have seen in previous years is reproducible. There are countries that have moved to facilitate investment and create jobs; there are others who do not. These are disparate growth rates in the region and we will continue to see it. We must move quickly to reverse the lost progress, especially in increasing poverty and inequality.
In this new stage, what is the support that the Bank is providing?
We have had a year (from July 2020 to June 2021) of high financial support to the region with loans above USD 10 billion, which is the highest figure that has been registered since 2008. Basically in two large areas: cushioning the social impact of the pandemic (social protection programs, vouchers, nutrition) and support to countries that are making reforms so that the recovery is more sustained in the medium and long term. Ecuador is one of them, where we have been financing, in the last three years, in an important way, projects in particular such as the reform process that we have found very positive. We hope that President Lasso will continue.
What is the agenda of your visit to Ecuador this Thursday and Friday?
Ecuador will be the first country I visit since I am Vice President. I have chosen it because it is an important country for us. There is a new government and we want to talk a lot with the Head of State and his team, to see how we can continue to support. I am very hopeful that we will be able to continue supporting this phase of recovery.
Will the aid be tied to the agreement with the IMF?
I have not discussed it in detail. We have been financing countries without or with agreements with the IMF. We will speak with the Government of Lasso. We want to support positive reforms for Ecuadorians along the lines that the Bank is working on.
Are there any pending disbursements?
At the moment it is premature, we must first dialogue.
Curriculum vitae
Carlos Jaramillo has a Ph.D. in Development Economics from Stanford University. He has served in various positions at the World Bank. Former Minister of Finance of Colombia.
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