COVID-19 UPDATE: Latin America

Latin America has been one of the hardest-hit regions by COVID-19, with five countries (Brazil, Argentina, Colombia, Mexico, and Peru) each surpassing or expected to surpass 1 million cases. As of September, Latin America accounted for 28% of worldwide infections and 34% of deaths, while accounting for 8.2% of the world’s population. To make matters worse, the region has not experienced a significant drop off in cases between infection waves, as has been experienced by most other countries. Instead, case numbers and deaths have continued to rise steadily. Experts attribute the severity of the outbreak in Latin America to a number of factors: the region’s flawed and underfunded health systems, ill-prepared to deal with the strain of the pandemic; widespread poverty concentrated in high-density, vastly overcrowded urban environments; and governments’ failure to adequately distribute aid to large segments of the population. The lack of effective stimulus measures forced many (especially those who participate in the informal economy) to continue working during the pandemic, contributing to the spread of the virus among the working population.

The pandemic has unquestionably wreaked havoc on the regional economy, reversing decades of progress on economic growth, job creation, and poverty reduction. The IMF estimated that the overall Latin American economy will shrink by 8.1% in 2020. A disproportionate amount of employment in the region cannot be performed remotely, contributing to a pronounced drop in economic activity. Regional economies are heavily dependent on international tourism, which has virtually evaporated for most of the year. Economic recovery efforts have been hampered by extended, long-lasting quarantines meant to prevent fragile health systems from collapsing under the weight of surges in cases. Consequently, analysts predict a sluggish return to pre-pandemic GDP levels unless structural policy changes are implemented. Looking to 2021, marginal improvements in growth levels will likely be unable to overcome Latin America’s pessimistic economic outlook.


The administration of President Alberto Fernández has yet to successfully prevent Argentina from sliding deeper into a recession, as the pandemic limits the country’s ability to maneuver through an impending debt crisis. Though the government reached a deal with private creditors in August to restructure US$65 billion in debt, the deal was largely centered around reducing interest payments owed by Argentina. Furthermore, Argentina still needs to restructure over US$44 billion in debt owed to the IMF. This comes as analysts predict the country’s debt to GDP ratio will rise to 110%. Faced with an impending crisis and a poverty rate already at 40%, the Argentine government continues to work with the IMF in an attempt to stave off the country’s 10th default. An exploratory mission by the IMF to Argentina in October began discussions on a new debt payment plan. Subsequently, the IMF announced that negotiators would return to Argentina this month for in-depth negotiations. Though it is unclear how a new deal would be constructed, Argentine Finance Minister Martín Guzmán announced that he seeks a deal that would not require Argentina to make payments prior to 2024.

In an attempt to build up its depleted international reserves, the government temporarily slashed taxes on agricultural, mining, and industrial goods. There are some reasons for measured optimism, with the IMF predicting an economic rebound of 4.9% next year. However, any positive developments for the Argentine economy are closely related to the resolution of the country’s debt, which as of now still remains uncertain. To make matters worse, half of Argentina’s provinces have been affected by the devastating fires raging across South America, largely caused by the illegal clearing of land for agriculture and construction purposes.  Argentina’s economic outlook remains highly muddled.


Though the Mexican economy saw a historic contraction at the height of the pandemic, the country has finally begun to recover with the resumption of economic activity both within Mexico and in the United States. Mexico saw impressive 12% growth during the third quarter, largely fueled by secondary sectors such as manufacturing, construction, and mining. Exports to the United States saw a modest 1.06% uptick compared to August, notable since this is the first time exports have increased since the beginning of the pandemic. Mexico has maintained a large trade surplus with its northern neighbor, making up for weak internal demand. Furthermore, remittances to Mexico reached an all-time high between January and September of this year, totalling almost US$30 billion and exceeding Mexico’s total surplus with the United States by US$10 billion. September alone saw over US$3.5 billion in remittances, setting a record for the month. Experts predict remittances will continue to hit record-setting numbers with the possibility of a new round of stimulus measures in the United States, which is by far the largest concentration of the Mexican diaspora abroad.

Last month, President Andrés Manuel López Obrador announced a privately-funded infrastructure plan aimed at jumpstarting additional growth in Latin America’s second largest economy. The plan has a total value of approximately US$14 billion and is composed of 39 projects, including a long-delayed railroad link between Mexico City and Querétaro. Officials predict the first phase of projects will generate up to 190,000 jobs. This signals yet another reversal for Mexico’s leftist president, who has often clashed with business leaders in his push to purge the Mexican government of corporate influences, as he increasingly turns to the business community (even before the pandemic) to move his agenda forward. That being said, the Mexican government strongly rejected calls by the IMF for more stimulus measures and tax reform, which it panned as a bailout for private corporations. In spite of an ongoing recovery, not all signs are positive for Mexico. The economy still shrunk by 8.6% in the third quarter in comparison to Q3 of 2019, and is still expected to shrink by 9% in 2020. Experts also warn that growth could be derailed once again by rising case numbers in Mexico and the United States as well as any instability caused by the US presidential election.  Mexico’s recovery continues to move forward slowly and as of now, seems headed in the right direction.


Despite largely failing to manage what has become the second largest COVID-19 outbreak in the world, President Jair Bolsonaro won praise for a generous stimulus program credited with sparing many Brazilians from the worst effects of the pandemic. However, reckless spending is threatening to derail Brazil’s already slow economic recovery. The centerpiece of this US$107 billion stimulus package (equivalent to 8.4% of Brazil’s GDP) was a monthly stipend given to the poorest families. The “corona vouchers”, as they came to be known, helped prevent a mass increase in poverty levels and significantly improved Bolsonaro’s approval ratings, even winning praise from the IMF. Bolsonaro has expressed desires to make certain aid measures within the larger package permanent that were set to expire by year end. A proposed plan would see the corona vouchers merged with the existing “Bolsa Familia” welfare program to create “Renda Cidada” or citizen income. In spite of repeated assurances from Economy Minister Paulo Guedes, investors are skeptical that Brazil can afford such a welfare expansion. Brazil had debt problems even before the pandemic, with the country’s debt ratio increasing by 30% in the past five years alone.

Recent turbulence in financial markets reflects fears that Bolsonaro will flout a constitutionally mandated spending cap introduced in 2016. Investors are rushing to unload Brazilian currency and stocks as Bolsonaro pushes for greater government spending as the country faces a primary budget gap amounting to 12.1% of GDP. Further warning signs for Latin America’s largest market include predictions of its economy shrinking by 5% this year and sluggish growth in 2021. Though Guedes maintains Brazil will cut spending and stabilize its budget at year end, it remains to be seen if Bolsonaro and his Economy Minister are on the same page.


The past few months have been a tumultuous period in Colombia, as the economic collapse brought about by the coronavirus was coupled with social unrest and internal security threats. Riots broke out across Bogotá in September in response to the police killing of 46-year-old law student Javier Ordóñez. Protests in the Colombian capital quickly became violent, as protesters engaged in clashes with police that left at least 13 people dead and hundreds more injured. Colombian authorities have been accused of failing in their duty to protect civilians from guerrillas and paramilitary groups that terrorize rural communities, a situation which has only intensified during the pandemic. In yet another example of the country’s struggle to secure lasting peace with violent actors, the pandemic has seen armed groups take the enforcement of quarantine measures into their own hands. Human rights advocates have sounded the alarm as COVID-19 provides these groups the necessary cover to cement their control over vast swaths of the country. Protests have now gripped Bogotá once again with the “Minga Indígena”, a movement of thousands of Indigenous Colombians joined by Afrocolombians, union workers, and student activists. The Minga has staged mass protests against the economic policies implemented by conservative president Iván Duque as well as the murders of human rights activists, the haphazard implementation of the peace accords reached with the now-extinct FARC guerrilla, and abuses of power routinely committed by Colombian security forces. Duque has continued to ignore calls for him to meet in person with protest leaders.

Colombia is facing its first recession in two decades, with unemployment on the rise and much of the Colombian workforce lacking access to stimulus measures. The IMF recently released an updated 2020 growth forecast of an 8.2% contraction. In response, the government has expanded its flexible credit line with the IMF and secured an additional $500 million loan from the World Bank, funding sources that will allow the Colombian government to finance stimulus and economic recovery efforts. Duque has staked much of Colombia’s economic reactivation on the Fourth and Fifth Generation Infrastructure Programs. The 4G program, initiated in 2014, has a total cost of about US$13 billion and is now approximately 40% complete. Projects composing the US$5 billion first phase of the 5G program are expected to begin construction shortly. In the meantime, the government has continued to pursue its reopening strategy with the resumption of commercial air travel. In the face of domestic unrest, it remains to be seen if Duque will be able to guide Colombia’s economy back to pre-pandemic growth levels.

Puerto Rico:

Heavily dependent on tourism, Puerto Rico’s already struggling economy fell even further as a result of the pandemic. The island must now look to its new leaders, elected last Tuesday, to steer the economy in the right direction. Though one of the main stories of this election cycle was the surge in popularity of newer parties such as the anti-colonialist Victoria Ciudadana Movement, results indicate the traditional two-party structure dominated by the pro-statehood Partido Nuevo Progresista (PNP) and the pro-status quo Partido Popular Democrático (PDP) will for now retain control over Puerto Rico. Pedro Perluisi, the PNP candidate for governor, has been all but confirmed as the next governor of Puerto Rico after eking out a victory over the second place finisher, Carlos Delgado of the PDP. Delgado officially conceded on Saturday. Nonetheless, third parties seem to have finally won a foothold in the Puerto Rican congress, which is sure to change political dynamics in the US territory. Puerto Ricans also voted once again, albeit by a smaller margin than in the past, for statehood in a non-binding referendum on the island’s status in relation to the United States. In the meantime, current governor Wanda Vázquez announced Puerto Rico would have access to $100 million dollars from the US Coronavirus Relief Fund to distribute to tourism-oriented businesses impacted by the pandemic. The next admiistartion will be tasked with continuing to help the island’s fragile economy through the pandemic, not only through aiding the tourism sector but also by diversifying the economy and channeling funds to infrastructure and agriculture developments.

Puerto Rico’s Financial Management and Oversight Board (FOMB) was thrown into uncertainty earlier this year with the resignations of former chairman José Carrión III and board members Carlos García and José Ramón González. Only two of these vacancies have been filled, with David Skeel being appointed as the new chairman and Justin Peterson being appointed to the board by the Trump administration. Despite two vacancies still remaining (Skeel was himself a general board member prior to becoming chairman), Skeel has stressed the importance of completing Puerto Rico’s debt restructuring process as stipulated under the PROMESA act. In the four years since PROMESA’s approval, the FOMB has only successfully restructured the debt of three government agencies. Skeel’s push to accelerate the board’s progress is complicated by the fact that at least five votes are necessary to submit new cases for restructuring. Nonetheless, the board is continuing its work as it looks to adjust current payment plans to the new economic reality imposed by the pandemic. Puerto Rico was struck by the pandemic during an extremely difficult economic period for its residents, and as such, a full recovery seems even more difficult to achieve.


After a string of anti-government protests beginning last fall aimed at pervasive social and economic injustices, Chileans took the streets of Santiago in droves once again. This time they were celebrating the approval of a historic constitutional plebiscite. The vote saw record-high turnout and determined that the country’s current constitution (drafted during the dictatorship of Augusto Pinochet) should be discarded. A new constitution will be drafted by a body composed entirely of officials elected by a popular vote. The referendum was approved by a massive margin of nearly 80% of voters. This result is the culmination of months of intensifying riots against entrenched inequality in South America’s wealthiest nation (per capita), which protesters attribute to the remnants of Pinochet-era neoliberalism. Chileans will vote to fill the 155-seat constitutional convention during regional elections scheduled for April 2021. The convention will then have a maximum window of twelve months to draft a document to be put to yet another vote in 2022. This process will effectively mark the beginning of what will surely be a long and difficult road.

President Sebastián Piñera must work to mitigate the effects of COVID-19 on Chile’s economy. Once among the fastest growing in Latin America, Chile saw its economy shrink by 11.3% in August, worse than the already grim prediction of an 8.5% contraction for the month. Surprisingly, this comes after a 10.7% contraction was reported for July. In an attempt to prevent the economy from deteriorating further, Piñera recently announced the enactment of a US$2 billion stimulus package meant to counter unemployment, which is at its highest level in over a decade. The program will channel funds to private businesses equivalent to 50% of the salary of every new employee hired for the next six months, while a parallel program will fund the salaries of those returning to the workplace after being furloughed. The plan seeks to create one million jobs and is primarily aimed at marginalized workers most affected by the pandemic, such as women and those with disabilities. There have been some positive signs for Chile, as a strike was narrowly avoided at the Escondida mine, the largest copper deposit in the world, and copper prices continue to rise buoyed by demand from China. Though Chile has thus far been one of the most successful countries in the region in controlling the spread of COVID-19, the complex social, economic, and political upheavals facing the country will pose a significant challenge for years to come.


Late last night, the Peruvian legislature voted to impeach President Martín Vizcarra. Lawmakers’ second attempt at impeaching the president arose in response to allegations that he accepted over US$640,000 in bribes during his tenure as governor of the southern Moquegua province. Vizcarra, who despite being one of the most popular presidents in Peruvian history has few political allies, continues to maintain his innocence. It remains to be seen how he will respond to the impeachment vote and how this development will affect the recovery efforts discussed below (written prior to Vizcarra’s impeachment).

As the country with the highest COVID-19 mortality rate in the world, Peru has been dealt a significant blow by a pandemic that caught its health system insufficiently prepared. Nonetheless, Vizcarra announced that the country will continue to push forward with its gradual reopening efforts. The centerpiece of this strategy is the Autoridad para la Reconstrucción con Cambios (ARCC), a government agency that has partnered with the British government to jumpstart infrastructure projects across Peru. Though the partnership was developed in order to address the damages caused by a particularly devastating El Niño phenomenon in 2017, these projects have been prioritized as a key part of the country’s economic reactivation after months of quarantine. The ARCC is in the midst of licensing what it refers to as the most important projects of the initiative, which are predicted to begin construction in the coming months. Peru has also looked beyond the ARCC while trying to jolt its economy back to life.

As one of the countries most hesitant to allow international travel to restart, Peru reestablished international air services to Colombia, Chile, Ecuador, Bolivia, Paraguay, Panama, and Uruguay last month, as part of Phase 4 of Vizcarra’s reactivation plan. At the behest of business leaders, the government announced that it would allow air services to resume to an additional 25 destinations throughout Latin America, the United States, and Canada this month. Increases in public investment and effective stimulus measures aimed at slowing negative growth are expected to have positive impacts on the economy. After shrinking by 30.2% in the second quarter, analysts predict the third quarter will see the Peruvian economy contract by approximately 11%, followed by 6% in the fourth quarter. Furthermore, Peru’s central bank has predicted that the economy will rebound by 11% in 2021. Despite quick actions by the Vizcarra administration failing to limit the spread of the virus, Peru’s economic outlook has become increasingly positive.

Many of the social, political, and economic challenges discussed in the prior edition of this newsletter have in fact continued to contribute to the complexity of the COVID-19 pandemic in Latin America, with countries finding themselves forced to reopen while failing to prevent an already record-setting contagion from spiking once again.

Furthermore, much of the region is increasingly finding itself at a worrisome inflection point, with already debt-laden governments unable to continue funding stimulus packages desperately needed by a population with low levels of formal employment. As the region struggles to preserve the progress made since the commodities boom, it is difficult to tell how Latin America will tackle a post-pandemic world.