Search

Begin New Search Topic COVID-19 Political Geography Latin America Content Type Working Paper Publishing Institution Center on Global Energy Policy (CGEP), Columbia University Publication Year within 10 Years Publication Year within 25 Years

1. Planning a Sustainable Post-Pandemic Recovery in Latin America and the Caribbean

Author:
Mauricio Cardenas and Juan Jose Guzman Ayala
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
In 2020, Latin America and the Caribbean (LAC) will experience the most severe economic recession in decades. This paper looks at the challenges confronted by LAC and proposes a series of actions to structure a recovery plan that minimizes potential moral hazard effects while aligning fiscal, social, and environmental sustainability priorities.[1] High pre-pandemic sovereign debt levels, worsening credit ratings, and low tax revenues limit the much-needed fiscal space to overcome the present health and economic crises. Most countries in the region are at risk of losing two decades of progress in the fight against poverty and inequality, while their upper-middle income status makes them ineligible for debt relief and aid packages from advanced economies. The focus on solving the current crisis may also delay much-needed progress on climate change mitigation and adaptation efforts, as well as overall improvements in the United Nations Sustainable Development Goals (SDG). We propose a combination of fiscal policy responses combined with new sources of financing to unlock a sharp recovery with minimal harm to fiscal sustainability in the long run. Through expanded public-private partnerships and blended finance structures, governments should be able to leverage private financing in large job-creation undertakings. Additionally, the issuance of SDG-linked sovereign debt and Special Drawing Rights (SDRs) with SDG conditionality could also provide much-needed liquidity at low cost.
Topic:
Environment, International Cooperation, Global Recession, Sustainable Development Goals, and COVID-19
Political Geography:
Latin America, Caribbean, and North America

2. Latin America Is Avoiding the Obvious Need for Reform. Why?

Author:
Mauricio Cardenas
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Since nearly the start of the COVID-19 pandemic, economic and political analysts have seen an urgent need – and opportunity – for Latin America to pursue reform. The argument is simple: The aftershocks of the current crisis will be devastating and long-lasting unless the region takes steps now to strengthen its labor markets and improve fiscal sustainability. That means taking advantage of unusual political circumstances to rally support for difficult decisions that have been put off for far too long. A failure to act would risk turning COVID-19 into the preamble to another lost decade. Unfortunately, there is little to suggest that governments in the region are prepared to use crisis in the present to prepare for the future. Throughout Latin America, the general response to COVID-19 has been to confront the challenge with increased spending. This will not have a happy ending. Governments will inherit massive debts, making it hard to deal with social unrest resulting from increased poverty and unemployment. Instead, the region needs to start making adjustments now – not only to spur economic recovery, but also to plant the seeds for a more sustainable performance down the road. The International Monetary Fund (IMF) last week added its voice to the chorus of those urging governments not to delay reform. As the region takes on debt to deal with the crisis, it will need to avoid falling over the fiscal cliff once the pandemic subsides, according to the IMF. That could mean, for example, pre-approving tax increases or the reduction in certain spending to be implemented once economic conditions return to normal. Labor laws could be changed to make it less costly for firms to hire (or hire back) workers, at least for the time being. Indeed, the right mix of reforms would have benefits in the short term as well. Given a better reading of future economic risks, markets and credit agencies would likely give countries increased fiscal space and capacity to deal with COVID-19 right now, when it is most needed. But there is little to suggest an appetite for reform. Few if any governments in the region have seriously pursued policy changes with a view not just of the short-term crisis but also their countries’ long-term health. Seldom has the disconnect between the opportunity for reform and the interest in pursuing it been so great. Instead of simply trumpeting the importance of reform, then, it’s important to also ask why it isn’t happening.
Topic:
Public Health, Sustainability, Pandemic, IMF, and COVID-19
Political Geography:
Latin America and North America