Although it is obvious that we are far from leaving this historical event behind, many seem to ignore it. It is time to set priorities and go for structural reforms to avoid another lost decade

By Martin Padulla for staffingamericalatina

It did not end. The first crisis that all human beings on the planet experienced simultaneously with some consequence, whether it was the virus, quarantines, health or economic aspects, is still part of our lives.
The world is being reconfigured. China’s growth has accelerated during the pandemic. We are moving towards a very different scenario of bipolarity than that experienced during the so-called Cold War. Trade between the United States and the former Soviet Union in the best year is equivalent to the numbers that the United States and China trade today.
The interconnection is total. The consequences of the crisis are diverse.
For Latin America it is the worst crisis in 120 years. The region is the hardest hit in the world. In the last days of last year, the Regional Director of the ILO, Vinicius Pinheiro said: “we have gone back 10 years in the last 10 months”.
A study by Eurasia Group states that “as they emerge from the pandemic, Latin American countries are facing the political, social and economic problems they were already facing before the crisis”.
Only three countries in the region will have a significant rebound effect: Peru (9%), Panama (5.5%) and Bolivia (5.1%). For all of them, uncertainty will be very high. The unemployment rate will rise to 11%. More than 2.7 million companies will close their doors. The youth unemployment rate is three times the general unemployment rate in several countries. Jean Gough, Regional Director of Unicef said that “never before have so many children been simultaneously affected by multiple emergencies in so many countries”.
The common denominator of all the projected variables was that they were subject to revision because of the possibility of a second wave that today seems to be a certainty.
In this state of affairs, structural reforms seem indispensable and urgent. We have left behind the so-called “annus horribilis” but the challenges continue and are more pressing every day. In a year of legislative elections in Argentina and Mexico and presidential elections in Ecuador, Peru and Chile, with a political class focused more on electoral campaigns than on management, there is no room for populism of the left or the right. We need to work on the creation of a good business climate through incentives to promote private initiative and build relevant talent, increase equal opportunities through various forms of knowledge acquisition and various forms of formal work, modernize all our regulatory frameworks to address this unprecedented crisis. Any other issue on the agenda of Latin American legislators seems imprudent, low priority and far from an efficient management of reality.
“Those who do home office are those who first have a home and those who in normal times perform tasks within formal offices. A reduced percentage within the region” points out the economist specialized in education and work, Gabriel Sanchez Zinny
If we do not manage to transform our development model, the risks of consolidating a lost decade are very high. We cannot continue to deceive ourselves; the region’s growth in 2019 was 0.1 percent, the worst among the major emerging regions, and even the average between 2009 and 2019 was the lowest since the disastrous “lost decade” of 1980-1990. This was the scenario before the word COVID made any sense to us.
“We are concerned that the region may emerge from this crisis more indebted, poorer, hungrier and with high unemployment. And above all, angry,” said Alicia Bárcena, Secretary General of ECLAC.
Many people still believe that wealth creation depends on natural resources, investment and physical labor. Some of them even become presidents. Robert Solow, winner of the 1987 Nobel Prize in Economics, was able to prove that classic production factors explain only 15% of wealth and that 85% comes from innovation.
Joseph Stiglitz, Nobel Prize in Economics 2001, concerned about inequality, believes that what one economic agent gains is lost by another, a zero-sum game. Adored by many Latin American populists, he establishes a vision that was common until the 17th century. Until that time, the size of the economy did not vary significantly from generation to generation. Since then, the advances of Humanity have been revolutionary and in the 21st century they have taken on an unprecedented speed. To continue debating how to distribute the cake is to validate the idea that the cake will be smaller and smaller. To give much strength to the concern raised by the General Secretary of CEPAL.

Transforming the development model into a more dynamic, formal, sustainable and inclusive one is the opportunity. The demand for structural reforms in order to move forward into the 21st century should be very strong. It will be up to the Latin American citizens to avoid the real possibility of a “decennium horribilis”.