As millions of people in Latin America anxiously await COVID-19 vaccines, governments across the region are struggling not just to immunize citizens but also to overcome another daunting problem — the worst economic collapse in 200 years.
Last year, the region’s economy shrank more than any time since 1821, according to a study by the Inter-American Development Bank (IDB).
About 31 million people have lost full time jobs and 44 million have fallen into poverty, a historic setback even for a region known for “lost decades.”
But it gets even worse.
The region recently reported its deadliest week since the pandemic began and infections are surging. Latin America and the Caribbean account for just 8 percent of the world’s population but over 28 percent of all COVID-19 deaths.
That should concern everyone in the Western Hemisphere. It could affect not just the evolution of more deadly COVID-19 strains but also the entire hemisphere’s economic recovery.
The problem demands a response from the Inter-American Development Bank, which was created in 1959 precisely to help the region overcome crisis.
Neither the IDB nor its members have faced a challenge on this scale, but the pandemic has also created opportunities for the region.
The mad scramble for ventilators and other trade disruptions encouraged companies worldwide to relocate their supply chains. That opens a once-in-a-generation opportunity, amplified by the Suez Canal incident, for the region to attract foreign direct investment.
A Gartner study shows that 33 percent of 260 companies surveyed have already moved sourcing and manufacturing activities out of China or plan to do so by 2023.
Meanwhile, the massive shift to online education, work and healthcare has created opportunities to invest in digitalization and connectivity.
That will be critical to creating jobs — but only if we ensure everyone has fast, affordable broadband.
We estimate that closing the connectivity gap with OECD countries would boost GDP by 7.7 percent and create more than 15 million direct jobs.
Because of this, when I became president of the IDB in October, I began working urgently with our experts to draft a blueprint for reinvesting in the region.
Last month, I laid out that plan at the IDB’s annual meeting in Colombia. The plan, which we call Vision 2025, calls for ramping up investment in five areas: integration and supply chains, digitalization, gender equality, small and midsize businesses and climate change.
Each area will be key to ensuring the region recovers robustly and sustainably. Consider gender, for example.
The pandemic disproportionately hurt women, depriving millions of mothers of income. And yet it is women who will drive the region’s recovery — if they are given the same opportunities as men.
Regionwide, women own about 1.3 million small and midsize businesses — about a third of all smaller companies. Yet, IDB has found 70 percent of these firms have zero access to credit, even though they are more likely to repay loans.
Closing Latin America’s gender gap would dramatically change its outlook.
In fact, achieving gender parity in the workforce could increase GDP by almost 23 percent, adding more than $1 trillion to economic output by 2025.
That would also empower female consumers, increasing opportunities for U.S. exporters and retailers that have never gotten a foothold in the region.
This is just one example of how focusing on these areas can help the region rebuild.
Vision 2025 adds to work the IDB is already doing to address problems like COVID-19.
In December, we launched a $1 billion initiative to help countries buy and distribute vaccines. More recently, we announced an innovative instrument to help governments negotiate with vaccine makers by resolving disputes over indemnity clauses. No multilateral development bank has ever done this.
In Central America, we helped create a $1.6 billion plan to help countries rebuild after hurricanes Eta and Iota. We are also creating hurricane clauses to help governments manage debt while dealing with increasingly common natural disasters.
And soon, we will unveil an initiative to help address the root causes of migration.
But we must do much more — and we need help.
Fortunately, at our annual meeting, an overwhelming majority of our members backed Vision 2025 and called on the bank to do the analytic work necessary to ensure we can meet the region’s needs.
We estimate the region needs $25 billion annually just to address pre existing conditions like poverty, inequality and violence, which all fuel migration.
Increasingly, leaders in and outside the region realize we need to do more. Last month, a bipartisan group of U.S. senators introduced a bill to support a capital increase that would help the IDB boost annual lending to $20 billion from $12 billion.
But we must also do much more with the private sector. Recently, 40 of the world’s leading companies pledged to work with us to increase investment in the region. Since then, more companies have joined us, and we will work tirelessly to partner with others.
All of this is critically important to the U.S. which remains the region’s top trade partner and whose economic health and security partly depends on the region’s recovery.
No single country or institution can solve Latin America’s problems. But by working hand-in-hand with governments and the private sector, we can ensure the region’s next decade is not one of loss, but of one growth and opportunity.
Mauricio Claver-Carone is president of the Inter-American Development Bank.