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Covid-19 and DISPARITies in latin america: back to square one?

January 7, 2021

 

By Vera Chiodi, Associate Professor at the Université Sorbonne Nouvelle (Institut des Hautes Études de l’Amérique latine) and member of the Centre de Recherche et de Documentation des Amériques (CREDA UMR 7227), currently under CNRS agreement.

Uncertainty surrounded the beginnings of the epidemic because Latin America and the Caribbean were barely impacted at first (as opposed to Europe and the United States) and a disputed debate raged at the public level: should the restrictive measures put in place by countries heavily hit at the beginning and at an opposite climate season be emulated? But very quickly, Latin America became the region the most affected globally by COVID-19 (this right up to October 2020, date when the reversed seasons put Europe in first place), representing more than one fourth of the global cases and a third of deaths when it only has 9% of the world population. So the region is over-represented when it comes to public health and economic costs. To this can be added a constant rise in hunger, struggling economies, a worsening of inequalities and a hurricane season that is approaching. Hunger and food insecurity could lead to numerous conflicts, political trouble and force vulnerable families to migrate. According to WFP[1], the number of people in Latin America and the Caribbean who don't know where their next meal will come from in the months to come has increased by four since 2019.

Donation campaign (campaña de frazadas), for "El comedor La Mascota", June 21, 2020 with the arrival of winter, Benavidez, provincia de Buenos Aires. (Photo: Bernardo Pérez)
Donation campaign (campaña de frazadas), for "El comedor La Mascota", June 21, 2020 with the arrival of winter, Benavidez, provincia de Buenos Aires. (Photo: Bernardo Pérez)

The region is experiencing an unprecedented crisis on the job market, a consequence of the COVID-19 pandemic. The drastic scaling back of jobs (34 million people found themselves unemployed), of number of hours worked and salaries explain the decrease in the level of economic activity (-9.4% in 2020). The perspectives are even more worrisome if you look at the fact that the impact has been unequal: women, children, informal workers (which represent 80% of workers in the lower quantile) and independents are the biggest losers. The road to economic recovery, which is taking shape very slowly (and certainly with an asymetric recovery among sectors which will add more distorsions) could be accompanied with a deepening of these differences.

 

THE PANDEMIC AS AN ACCELERATING CAUSE OF PREEXISTING INEQUALITIES

 

This crisis is therefore exacerbating the size in disparities that existed before the start of the pandemic, even if most of the countries have made efforts to quickly put in place a number of policies to help with jobs and income. It can also lead to backsliding on progress done in the past decade or two on the most unequal continent in the world. During the pink tide (first decade of the 2000s), the economic growth driven from the outside (and tied to a decrease in poverty as well as disparity in income distribution) has been linked to the expansion of the middle class (significant social progress, seeing as its size has often been used as a measure of happiness). Today, the middle class is losing - in terms of income - relatively more than the poor. The economic recovery will also depend in large part on their return, and especially on their consumer behavior: middle class people are often described as those who buy goods they don't need, with money they don't have, and to impress the people they don't know[2].

Campaign to donate blankets (campaña de frazadas), for "El comedor La Mascota", June 21, 2020 with the arrival of winter, Benavidez, provincia de Buenos Aires. (Photo: Bernardo Pérez)
Campaign to donate blankets (campaña de frazadas), for "El comedor La Mascota", June 21, 2020 with the arrival of winter, Benavidez, provincia de Buenos Aires. (Photo: Bernardo Pérez)

As it has been well demonstrated in the Province of Buenos Aires, the virus in most of the countries in the region seems to have been brought over by the richest groups coming back from work assignments or leisure travel. In the first weeks, most of the health facilities dealt with a lack of clear public health protocoles. Considering that the cold season was going to follow the arrival of the virus in the Southern Cone, the region has been waiting since April for the peak of the epidemic. Another distinctive feature was the "community" quarantine in working-class districts (or "slums") where housing is overcrowded, which forces the residents to go out in public places more often in order to get essential goods. The lockdown was not just for the home, but also included whole neighborhoods.

 

A SERIES OF NEGATIVE IMPACTS (THE WORST OF ALL POSSIBLE WORLDS)

 

This public health "impact" created an economic "impact" with consequences that are already seen short-term (mostly focused on the partial or total decrease in income), but also long-term. The long-term consequences are much more worrisome since their irreversable nature is stronger, since they are more focused on the accumulation of human capital (as in education and health) and this is what is a direct contributor to the intergenerational transmission of inequalities. The most vulnerable groups are at the center of this situation: the poorest, but also those who can fall below the poverty line.

 

The lockdown that is mentioned the most is the school shutdowns. Yet, closing schools over long periods of time is new in recent history. The long-term costs on education is one of the main concerns since investment in education has positive consequences on both equity and growth, and because access to education is differentiated by the social-economic standing of the households.

Photomontage by Claudio Rinaldi, July 2020. On the outskirts of Lima, at the entrance of a store.
Photomontage by Claudio Rinaldi, July 2020. On the outskirts of Lima, at the entrance of a store.

In Latin America, according to recent estimates (which include the hypotheses that one sick person per family is equivalent to  one week lost in distance learning and that one death in the family can equate to three weeks lost in school or disengagement), one school day at home can be equivalent to one day at school only if the training level of the parents can allow them to be substitutes for the teachers, which reinforces the recurrence of disparity since there is a direct link between the parents' education and the children's. The switch from formal education to informal education (via internet or through mentors) is very different according to the social-economic origins. The main burden for the poorest of the region is that the probability of finishing secondary school today is the same as that of children born in the 1960s.

 

The cost of inaction[3] for early childhood is also not trivial. The current levels of investment and political commitment in favor of children are sub-optimal and have deteriorated compared to the past. Children under five might not reach their full potential of development, leading to so called hysteresis processes: situations with harmful consequences and losses that cannot be regained in the short term[4]. One of the impacts is the closure of preschool programs, or reduced access: the pandemic could bring back the enrollment rate (already weak, 42.2% and 14.9% for countries in the region that have a below median salary and those with low means, respectively) to zero for several months in many countries in the area. Closing primary schools is not the only factor tied to the pandemic that is affecting the children. We are also seeing an increase in stress, violence and poverty. In Argentina, Brazil, Colombia and Mexico, the impact is still strongly asymetric and is especially hitting the children that come from disadvantaged families. Consequently, unequal opportunities should be going up substantially, despite mitigating measures.

 

Because of the pandemic, most governments are trying to break the vicious circle of poverty. Conditional monetary transfers, by nature specific, have become more and more universal[5]. They help, but don't compensate for all the losses and are extremely varied. Brazil has a generous social system, Argentina as well but to a lesser extent, Colombia is fairly unresponsive, Mexico is shocking in its inaction. The big novelty of contemporary capitalism is the creation of a social protection cover and we can see the paradox of this crisis by comparing Brazil and Mexico. Brazil provides social aid to 150 million people and these aids will most certainly be important buffers against the current crisis, so much so that it is unlikely that poverty will increase in the short term because of the pandemic. At the total opposite, Mexico has no active measures in place to compensate for the negative effects of the pandemic on the population, so we can predict that this country will see the highest increase in poverty among the four largest countries in the area cited above.

 

FROM A VIRTUOUS CIRCLE TO A VICIOUS CIRCLE?

 

Before COVID, the area was doing rather well on the social mobility side (especially with respect to access to education and the decrease in "skill premia"). Empirical research[6] shows that the decrease in the Gini coefficient in the last decades can be explained by both the social protection measures and the decrease in salary disparity. The general improvement of access to education brought a decrease in disparity within the job market during the pink tide. Post COVID-19 could take us back to the past by increasing this "skill premia". According to the OPHI[7], the pandemic is going to slow down, if not reverse the multidimensional poverty reduction curve[8] and bring it back to the level it was 3 or 10 years ago.

 

In theory, human capital protects against income shocks and income can protect human capital. But the current situation is all the more harmful that, even if the income is maintained in some cases, the loss of human capital is almost irreversible. The economic history has rarely shown such an unusual combination in which the long-term impact of macroeconomic crises mix with the consequences of natural disasters, as if a significant macroeconomic crisis went with an earthquake.

 

 

[1] World Food Programme, July 29, 2020, "Hunger rises as Covid-19 cases surge in Latin America

[2] Taken from Thorstein Veblen's book, The Theory of the Leisure Class, Gallimard Publication: 21-03-1978a. Those consumer behaviors are partly associated with the bottlenecks due to the increase in demand of imports and successive balance of payments crises.

[3] The loss of productivity over a lifetime coming from a lack of investment in educational care given to children.

[4] The issue is that these vulnerable people who become poor don't come out of it and become poor on a permanent basis.

[5] What Macri's government had put in place with the pensiones universales, as well as AMLO a few months before the epidemic showed up.

[6] “Declining Inequality in Latin America: A Decade of Progress?”, Edited by Luis Felipe López-Calva and Nora Claudia Lustig- May 28, 2010.

[7] Oxford Poverty and Human Development Initiative

[8] The multidimensional index includes living conditions such as those tied to housing, but also the variables that trace salary level, education level such as access to the job market and social protection.


Vera Chiodi is an Associate Professor in Economy at the Université Sorbonne Nouvelle (Institute of Latin American Studies) and member of the Centre de Recherche et de Documentation des Amériques (CREDA UMR 7227). She is currently working under a CNRS agreement. She is co-responsible for the Research Axis Action Publique Action Collective (ACAP) of CREDA. She obtained her PhD in Economic Sciences from the École d’économie of Paris, then did a post-doc at J‐PAL Poverty Action Lab. She is affiliated with the Centro de Estudio para el Desarrollo Urbano, of the Universidad de San Andrés, Buenos Aires, Argentina.  Her research is focused on development economics, economics of education and the job market. She just received a grant from Procope Plus 2021Partenariat Hubert Curien (PHC), financed by Deutscher Akademischer Austausch Dienst (DAAD), Ministère de l’Europe et des Affaires étrangères (MEAE) and the Ministère de l’Enseignement supérieur, de la Recherche et de l’Innovation (MESRI). She recently published "More is more. Livelihood interventions and child labor in the agricultural sector".