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The social and economic impact of the COVID-19 pandemic and the Latin America and the Caribbean response to the crisis

Published onJul 06, 2021
The social and economic impact of the COVID-19 pandemic and the Latin America and the Caribbean response to the crisis

It’s been a year since the coronavirus landed in Latin America, with the first case confirmed in São Paulo on February 26, 2020. Within a month of that date, countries across the region shuttered schools and airports, closed businesses, and implemented a range of restrictions to control the pandemic. Tragically, few were successful, and the region’s COVID-19 death total exceeded 1,200,000 by June 2021.

On top of this terrible tally is a deep social and economic cost. Latin America and the Caribbean experienced, per IMF projections, a 7.4% contraction in 2020. Even as vaccines appear to offer a light at the end of the tunnel, 2021 began with outbreaks and fears of new variants, threatening hopes for a swift recovery.

Impact of the COVID-19 pandemic

Impact on access to healthcare

Health systems in LAC countries have significant weaknesses. They are underfinanced, segmented, and fragmented, which results in significant barriers to access. Weaknesses in the performance of the health authorities’ steering role are accompanied by low public expenditure averaging 3.7% of GDP, far from the 6.0% target recommended by the Pan American Health Organization (PAHO). On average, households in the region cover more than one-third of health care costs through direct out-of-pocket payments (34%), while nearly 95 million people incur catastrophic health expenditures and nearly 12 million become poorer as a result of these expenditures. The average availability of physicians and hospital beds is around half of what is available in more developed countries, such as those in the Organization for Economic Cooperation and Development (OECD)1.

The COVID-19 pandemic has cruelly evidenced the inequalities in access to health services. For those at the bottom of the income chain, those without good health coverage, those working in the informal sector and those living in remote or underserved areas, becoming ill can have catastrophic consequences, both on their health and on their livelihood. Many are not covered by health insurance and face a higher risk of mortality because they cannot get good quality health care.

The pandemic has posed a higher risk to certain groups, including the 85 million people who are over 60 years of age and the 70 million people with disabilities. Among other hardships, the spread of the virus has impeded treatment of the most common chronic diseases in these population groups, exposing them to the risk of early death. The health crisis has led to a shift in the care of patients with non-COVID-19 diseases. Care is being postponed or interrupted, especially in terms of morbidity, programmed activities, and control of noncommunicable and chronic diseases. This has led to a significant increase in overall mortality, additional to the deaths caused by COVID-19, and to deficiencies in the care of other diseases2.

Impact on the Economy and Poverty

Latin America and the Caribbean is the most unequal region in the world and the most urbanized of the developing regions, exposing a significant portion of the population in conditions of vulnerability to COVID-19. The pandemic has erupted in a complex economic, social, and political scenario, with low levels of growth and high levels of labor informality. Aside from the health risks, the region has had a significant socio-economic impact. Dropping of oil, metal and minerals prices have resulted in plunging Latin American markets. LAC countries are being impacted through various externa! channels, including the financial market, trade, investment, commodities and the tourism sector,

leading to the biggest economic contraction in the region in the last 100 years. Returning to pre-pandemic economic activity levels will take several years. If the average growth rate in regional Gross Domestic Product (GDP) held steady at 3.0%, GDP would only return to 2019 levels in the year 2023. However, with the average growth rate seen over the last decade at 1.8%, GDP would not attain 2019 levels until 2025. Indigenous populations (60 million people who account for just under 10% of the Latin American population) and Afro descendant people (21% of the Latin American population) have been disproportionately affected, since they tend to live in worse socioeconomic conditions, have limited access to social protection, and face high levels of discrimination in the labor market. The COVID-19 crisis has also exacerbated the vulnerability of migrants and refugees.


Impact on the Social Determinants of Health

The direct effects of COVID19 are exacerbating existing health inequities. For example lack of access to essential health services such as immunization or access to Non-communicable diseases management are disproportionally affecting groups with lower socio-economic status who face profound inequities in access to money and resources, and those facing discrimination, such as indigenous and populations of African descent3. Reproductive health services have also been affected in the region as well as services for survivors of violence against women

The indirect effects of COVID-19 beyond health are equally disturbing. The necessary containment measures have particularly impacted upon the livelihoods of populations in situations of vulnerability. Those in higher socioeconomic positions are sheltered from the most severe repercussions of stay at home measures, being able to work from home and living in less crowded conditions. However, most of those engaged in employment with unstable, informal conditions without social protection do not have this luxury. For them, adhering to public health measures is exceptionally challenging and overcrowded conditions increase risk of infection.

A significant number of women and girls are being affected by the ‘shadow pandemic’ of violence against women. Loss of employment and income affects their wellbeing and the social determinants of their health for years to come, as pre-existing inequities are deepened and their social conditions worsened

Impact on Food Security

In Latin America and the Caribbean countries, acute hunger has quadrupled.  Reduced calorie intake and compromised nutrition threaten gains in poverty reduction and health and could have lasting impacts on the cognitive development of young children10.

Some food producers also face losses on perishable and nutritious food as consumption patterns shift towards cheaper staples. Though current food insecurity is by and large not driven by food shortages, supply disruptions and inflation affecting key agricultural inputs such as fertilizers and seeds, or prolonged labor shortages are diminishing seasons crops.

Impact on Education

More than 144 million students have missed more than a year of school in the LAC countries, due to public health measures taken by governments in response to the COVID-19 pandemic. The health crisis has meant a triple shock for children and adolescents, with the prolonged closure of schools, confinement due to lockdown measures and the loss of economic security in households. This triple shock has both short- and long-term repercussions that put the development of an entire generation at risk. Although governments throughout the region have implemented distance learning strategies intended to maintain a degree of continuity in children’s and adolescents’ learning and well-being, these solutions have been unevenly implemented and may even further exacerbate the education gaps that existed in the region before the pandemic4.

A group that has been particularly affected is that of students from families with a lower socioeconomic level, and within them also migrants. This slowdown in learning does not have the same consequences for all children and adolescents. For students from families with more resources, education continues to occur, since they live in homes whose sociocultural capital and greater opportunities tend to mitigate the impact on learning and the psychosocial effects that the interruption of face-to-face education brings with it; On the other hand, for the most disadvantaged groups, school is often their only way out, to exercise their right to education5.

Impact on labor

As of September 2020, 30.1 million people were out of work, according to the International Labor Organization’s report6.  That may only mark a 1.9 %increase when compared to the first three quarters of 2019, but only looking at the unemployment rate obscures a larger problem: a 5.4% shrinking of the labor force. The latter is the more worrying trend, given that Latin America has long suffered from low productivity.

The pandemic has also led to a decrease in informal workers. While an economic recession typically pushes people from the formal to the informal sector, quarantines have restricted the overall circulation of people, leading to a reduction of informal workers.

All in all, 23 million Latin Americans stopped trying to gain employment in the first three quarters of 2020, which means the labor force amounts to only 57.2% of the region’s working-age population deemed to be employed or actively looking for work. If those who dropped out decide to return to the workforce, unemployment could jump from last year’s 10.6 % to 11.2 % in 2021.

The groups most affected have been those that cannot work from home because of their type of employment. They include women, who in addition to experiencing job losses have also had to leave the labor market to take care of their households; informal workers affected by prohibitions on people’s movements; sectors related to commerce, manufacturing, construction and services such as tourism and entertainment; young workers who are just joining the labor market; lower-skilled workers in more informal jobs that require physical proximity; and micro, small & medium enterprises (MSMEs)7. As previously stated, workers in the informal sector (mostly women) are particularly vulnerable, accounting for 53% of total employment in LAC.

Women are being more severely affected by the crisis, since they are overrepresented in the economic activities most impacted by measures to contain the virus and in the labor sectors most exposed to infection. Women represent more than 70% of those employed in health and social work. Though these women represent the bulk of frontline workers who face the direct risks of responding to the virus, they tend to be engaged in lower-skilled and lower-paid jobs in the health sector. Closures of early childhood education centers, care services and schools, along with the unavailability of older relatives to provide support, have exacerbated the unequal distribution of care. Furthermore, confinement has added to the burden of women in terms of caregiving, and exposed them to higher risks of domestic violence, including femicide.

The COVID-19 labor crisis has also severely affected the employment of young people between 15 and 24 years of age in three ways: (1) disruptions to education, training and work-based learning; (2) increased difficulties for jobseekers and new labor market entrants; and (3) job and income losses, along with deteriorating quality of employment. According to available data from four countries in the region, the drop in employment for people in this age range in 2020 was -7.8 percentage points, compared to -7.3 percentage points for those 25 and older15.

The Latin America and the Caribbean response to the crisis

In 2021, Latin America and the Caribbean faces an economic context that remains complex and uncertain. The coronavirus disease (COVID-19) pandemic continues to impact the region, with a fresh wave of cases that has led to the implementation of new public health measures to curb the spread of the virus. In 2020, Latin America and the Caribbean was the developing region most affected by the pandemic.

LAC countries have been undertaking measures to boost the capacity of their social protection and healthcare systems to cope with the impact of COVID19: Governments have implemented economic relief measures such as temporary expansion of existing cash transfer and in-kind programmes, additional transfers to vulnerable groups not covered by existing programmes, specific financing lines, low-cost or zero interest loans, payment of salaries through public funds, postponement of various tax payments and social security contributions, and postponement of loan payments. Furthermore, countries have taken measures to lighten the financial and procedural burden of personal tax, public utility, credit card, loan, and mortgage payments.

In general, countries in the region have adopted expansionary fiscal policies to address the social and economic effects of the pandemic, with fiscal efforts aiming at strengthening public health systems, supporting families and protecting the productive structure, representing 4.6% of GDP on average. The expansion of public spending to cope with the crisis, together with the fall in tax revenues, have significantly pushed up fiscal deficits and debt levels in the region. Latin America and the Caribbean is one of the world’s most indebted regions and has the highest ratio of external debt service to exports of goods and services, at 59%. Given the evident fragility of the economic recovery process, an expansionary fiscal policy will most likely be maintained. To do so, additional sources of financing in the region are needed. It is therefore essential that international cooperation, through development financing, support the expansion of countries’ fiscal space in the short and medium terms. It is also critical to mainstream a gender perspective in the design of fiscal policies.

Much remains to be done and moving in these directions will be key to ensure an equitable and sustainable post-crisis recovery in Latin America and the Caribbean.

Dr Jeanette Vega Morales is the Chief Medical and Innovation Officer at Red de Salud UC-Christus, the main private health provider in Chile. An MD from the Universidad de Chile and a PhD in Public Health from the University of Illinois at Chicago, she has over 20 years of experience in international health. Her areas of expertise include social determinants of health, health equity, and health systems. 

She served in the WHO between 2003 and 2007 as Director of the Equity and Social Determinants of Health. She served as Vice-Minister of Health in Chile between 2008 and 2010 as part of President Bachelet´s first term. Between 2012 and 2014, she was the Managing Director of Health at the Rockefeller Foundation. She resigned to join President´s Bachelet second term team as Director of the National Health Fund. In March 2018, she joined Red de Salud UC CHRISTUS as Chief Medical Innovation and Digital Transformation Officer. Over the years, she has collaborated in several international advisory committees and boards, and with multiple international and national health organisations.

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