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Downtrodden in a Shut Down

The quickly spreading COVID-19 pandemic is testing countries鈥� healthcare capacities globally, as exponential growth in cases, and the severity of the disease, push some of the world鈥檚 to the brink.

These challenges are acute in Latin America, where healthcare systems rank well below those in North America and Europe, raising concerns about the region鈥檚 ability to handle adequately a surge in patients. For now, the absolute number of remains low, though that is likely the result of inadequate testing. Even so, the growth rate is high.

Governments in the region recognize the peril. With a few notable exceptions 鈥� namely , and Nicaragua 鈥� most Latin American countries have imposed strict social distancing measures, including mandatory quarantines.

On March 20, for example, Argentine President Alberto Fern谩ndez followed Panama and Peru in imposing a national lockdown to slow the virus鈥檚 spread, despite severe economic consequences for a country already teetering on default. Unlike Panama and Peru, which had healthy economies and access to credit prior to the outbreak, Argentina was entering its third year of recession. 鈥淚f the dilemma is the economy or life, I choose life,鈥� he . But now, Mr. Fern谩ndez must show that the economic sacrifices were worth it, rapidly so he can prevent a collapse of the country鈥檚 already healthcare system, avoid overtaxing its already strained social services and budget, and safely phase out the isolation measures.

So far, the public is on his side. Mr. Fern谩ndez, elected with 48 percent of the vote in October, has seen his approval rating jump to 69 percent. But Argentina鈥檚 coronavirus caseload keeps growing, now at 1,628, according to the World Health Organization. And the challenge of virus control is daunting.

What is particularly concerning to Argentine authorities is the well-being of the country鈥檚 , many of whom lack access to sanitation and healthcare. Nearly 1 million Argentine households in one of the country鈥檚 4,416 informal settlements, known as villas, sometimes . Many of them work in Argentina鈥檚 large informal sector, depriving them of important government services, benefits and labor protections.

Unprepared for the Fight

The COVID-19 crisis will produce the worst year for the world economy since the 2008 global financial crisis, and 鈥渢he worst growth year in Latin America in the last 50 years,鈥� to the International Monetary Fund. Argentina is particularly ill-prepared to address this economic fallout, even as it potentially faces disproportionately severe public health impacts.

Even before the outbreak, Argentina鈥檚 economic prospects were dim. A likely default, anti-competitive economic policies, , and had analysts a 1.2 percent contraction for this year. Now, the Economist Intelligence Unit a 6.7 percent contraction.

Before the pandemic, the poverty rate 36 percent, an increase of almost ten percentage points from two years earlier. Extreme poverty was 8 percent, almost double the rate from two years earlier 鈥� a result of a weak labor market, and high inflation bludgeoning real wages for those still employed. Real salaries by 16 percent between 2015 and 2019. Last year, Argentina 167,000 private sector jobs, as the unemployment rate hit 9 percent.

Today, economic conditions are far worse. Given languid activity, the government鈥檚 strategy of raising taxes , and additional taxation during a deep recession would be injurious. As long as the country delays its debt restructuring, meanwhile, it will remain of credit markets. That has left to pay for stimulus measures: printing pesos. For Argentina, a country with a notoriously poor track record of controlling inflation, that approach is .

Another disadvantage for Argentina is its failure to save during boom times. Unlike Chile, Argentina did not set aside a portion of its extraordinary revenues during the commodity super cycle of the 2000s. As a result, it finds itself in the as other vulnerable emerging markets, such as Zambia, Turkey and South Africa, with no meaningful rainy day fund to tap.

Image Credit

Source: World Bank, International Debt Statistics

 

First, Fighting the Disease

From an epidemiological perspective, Mr. Fern谩ndez鈥檚 decision to shut down the economy was the right one. Indeed, despite hyper-polarization, a large majority of Argentines the quarantine, and Mr. Fern谩ndez, like who have adopted dramatic public health measures, has seen his approval rating shoot up.

That public support is not only politically advantageous; it has also translated into a high degree of compliance with the lockdown. Google鈥檚 geolocation data the quarantine is being rigorously observed, with a near total drop-off in transit and visits to retail and recreational establishments.

But it is not clear how long Argentina can sustain the quarantine鈥檚 economic and social costs.

The lockdown is particularly painful for laborers in Argentina鈥檚 large informal economy, which accounts for 36 percent of the force. From day laborers to street vendors, millions of poor and working-class Argentines have seen their incomes evaporate overnight thanks to the quarantine. Going forward, their continued adherence might depend on whether the government meets their basic needs, including food for their families. As one informal worker , 鈥渢he truth is that I am not concerned about the coronavirus, I just don鈥檛 want this to stop us from eating.鈥�

Image Credit

IDB Data

Brother, Can You Spare a Dime?

The social situation in Greater Buenos Aires is of particular concern, as it is home to a third of the country鈥檚 population, including many vulnerable Argentines.

Prior to the COVID-19 crisis, unemployment in Greater Buenos Aires stood at 10 percent. Poverty had increased rapidly since 2017, reaching 41 percent last year.

Image Credit

UNDEC Data

It is too soon to obtain data on the employment effects of the crisis, or its impact on poverty. But early indications are worrisome. Since the start of the quarantine, the region has seen a 40 percent increase in the . Countrywide, those relying upon food support has reached 11 million, an increase of 3 million people. Since communal kitchens complicate social distancing, the Argentine military has begun .

Nowhere Else to Turn

These increasing social needs 鈥� arising from the coronavirus鈥檚 health and economic impacts, and the consequences of the nationwide quarantine 鈥� are imposing huge burdens on Argentina鈥檚 national and provincial authorities at a time of exceedingly scarce resources. Unlike a typical economic crisis, social distancing rules inhibit charities and political parties that might otherwise help distribute goods to those in need.

This problem is not unique to Argentina. Brazil faces similar challenges in its favelas, for example. In Guayaquil, Ecuador, the pandemic has produced a for the city鈥檚 poor. But the concern is particularly elevated in Argentina, which lacks the resources or borrowing capabilities of other countries in the region that it needs to strengthen its health sector and shelter its most vulnerable populations from the economic collateral damage of virus control measures.