Transcript ECLAC Subregional Headquarters for the Caribbean Global crisis and Government’s responses in LA and the Caribbean economic and social implications Jamaica, June 2009

ECLAC Subregional Headquarters for the Caribbean
Global crisis and
Government’s responses in
LA and the Caribbean
economic and social implications
Jamaica, June 2009
1
Outline
I.
II.
III.
IV.
V.
The global economic crisis
Impact in LA and the Caribbean
Policy responses
Social implications
Conclusions
2
I. The global economic crisis
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




In middle 2007 the U.S. economy was confronted by
the bursting of the real estate bubble
This resulted in unprecedented losses for banks with
large holdings of mortgage-backed securities
Eventually, those banks became insolvent putting the
international financial markets under risk of collapsing
The panic and uncertainty in the financial markets
quickly translated into a sharp credit contraction
A contagion effect with the real economy developed all
around the world, unleashing a global recession
4
GDP Growth 2008 – 2010
2008
2009
Projection
2010
Projection
Global Economy
3.2
-0.75
2.0
United States
0.8
-3.25
0.25
Euro Zone
1.1
-2.6
0.2
Japan
-0.7
-5.8
-0.2
Emerging and Developing
Countries
6.1
2.0
4.0
Source: IMF, March 2009
In 2009, the world economy will contract for the first time since
World War II, and most forecasts agree that this recession will
continue well into 2010
5
II. Economic implications
in LA and the Caribbean
6
How does the crisis filter to the LA and Caribbean
economies?
The Real Sector
 Decline in volume of exports
 Deterioration of terms of trade
 Reduction in remittances
 Slowdown in tourism activity
 Reduction in Foreign Direct Investment flows
The Financial Sector
 Tighter and more expensive access to external and
domestic financing
7
LA and the Caribbean economies will slow dramatically in 2009
P a n a ma
P er u
Su r i n a me
C uba
B ol i v i a
U r ugua y
Guy a na
Bel i ze
D o mi n i c a n R e p u b l i c
H ondur a s
T r i ni da d a nd T oba go
G u a t e ma l a
A r ge nt i na
E C C U C ount r i e s
N i c a r a gua
V e ne z ue l a
C o l o mb i a
Hai ti
E l Sa l v a d o r
B a h a ma
C a r i be
E c ua dor
C hi l e
LA a nd t he C a r i bbe a n
P a r a gua y
C os t a R i c a
Br asi l
M exi co
B a r ba dos
J a ma i c a
4. 0
3. 5
3. 5
3. 0
3. 0
2. 5
2. 0
2. 0
1. 5
1. 5
1. 5
1. 5
1. 5
1. 4
1. 0
1. 0
0. 5
0. 5
0. 5
0. 5
0. 1
0. 0
0. 0
-0. 3
-0. 5
-0. 5
Expected GDP
Growth, 2009
-1. 0
-2. 0
-2. 0
-2. 5
-3
-2
-1
Source: ECLAC on the basis of official data
0
1
2
3
4
5
8
The fall in tourism activity will particularly affect the Caribbean
América Latina y el Caribe
Trinidad and Tobago
Suriname
San Vincent and the
Santa Lucia
San Kitts and Nevis
Jamaica
Guyana
Granada
Dominica
Belice
Barbados
Bahamas
Caribe
Mexico
Republica Dominicana
Panama
Nicaragua
Honduras
Haiti
Guatemala
El Salvador
Costa Rica
Centroamérica
Venezuela (R.B.)
Uruguay
Peru
Paraguay
Ecuador
Colombia
Chile
Brazil
Bolivia
Argentina
América del Sur
LA and the Caribbean: Exports of Services
related to the Tourism Sector, 2007
(Percentage of GDP)
0
5
Source: ECLAC on the basis of official data
10
15
20
25
30
9
The prices of our commodities have gone down
Commodities Index
(2000 = 100)
Source: ECLAC
10
The contraction of FDI will affect most to the smaller Caribbean
and Central America economies
Antigua y Barbuda
Granada
San Vicente y las Granadinas
Saint Kitts y Nevis
Dominica
Belice
Panamá
Bahamas
Costa Rica
Honduras
Nicaragua
Chile
R. Dominicana
Perú
Uruguay
Centroamérica
Colombia
Caribe
América Latina y el Caribe
Guatemala
El Salvador
Net Foreign Direct Investment, 2008
(percentage of GDP)
América del Sur
México
Bolivia
Argentina
Brasil
Ecuador
Paraguay
Haití
Venezuela
-2
Source: ECLAC
0
2
4
6
8
10
12
14
16
18
20
22
24
26
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Remittances from migrants stagnated in 2008 and will probably
contract in 2009
30%
Growth rate in workers’
remittances to LA and the
Caribbean
Annual growth rate
25%
20%
15%
25.4%
21.2%
10%
18.8%
16.8%
15.1%
13.6%
17.8%
5%
6.4%
0.1%
0%
2000
Source: The World Bank
p = preliminary
2001
2002
2003
2004
2005
2006
2007
2008 p
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III. Policy Responses in LA
and the Caribbean
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

Governments in LA and the Caribbean have not been
idle watching the crisis unfold
So far, the policy response has been mostly
characterized by:
Stimulus efforts majorly based on expanded public
expenditure
 Increased role and intervention of the state in the
economy
 Appeals for credit from multilateral agencies and financial
markets to cover budget imbalances
 Efforts to preserve/increase social expenditure to protect
advances made during the last decade

14
The response to the global crisis has been at the centre of the
public agenda
25
LA countries where policy measures have been
adopted/proposed as of March/April 2009
Caribbean countries where policy measures have been
adopted/proposed as of March/April 2009
Number of countries
20
15
10
18
17
17
17
17
13
11
10
5
8
8
0
Monetary and
Financial Policy
Fiscal Policy
Exchange Rate and
Trade Policy
Sectorial Policy
Labor and Social
Policy
Source: ECLAC on the basis of official data from 20 LA countries and 14 Caribbean countries surveyed
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Policy response in Latin America and the Caribbean
Monetary and Financial
Policies
Fiscal Policies
Exchange Rate and
Foreign Trade Policies
Sectorial Policies
Labour and Social Policies
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay
Venezuela
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Bahamas
Barbados
Belize
Guyana
Jamaica
Suriname
Trinidad and Tobago
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Anguila
Antigua and Barbuda
Dominica
Grenada
Saint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Source: ECLAC on the basis of official data as of March/April 2009
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IV. The Social Implications
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

Regardless of efforts by governments, it is clear
that the global crisis will still affect the Region
negatively
Some major social concerns:
Rising unemployment
 Set back in poverty reduction
 Increased civilian unrest
 Increased criminality
 Worsening of health status

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Unemployment is expected to rise in LAC
Regional employment rate
2009
2008
2007
2006
2005
2004
2003
6
2002
50
2001
7
2000
51
1999
8
1998
52
1997
9
1996
53
1995
10
1994
54
1993
11
1992
55
1991
12
1990
56
Regional unemployment rate
Source: ECLAC on the basis of official data as of March 2009
Unemployment in the Region would rise from 7.5% in 2008 up to
8.5% or 9% in 2009
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

Poorer families are more vulnerable to unemployment
and loss of revenue
Usually poorer families are also the ones with the worst
access to health care, educational services, food security,
etc.
The increment of unemployment in the Region would
be reflected in an increase in poverty rates and health
issues, like malnutrition
20
A key issue: the Millennium Development Goals
Established by the UN in 2000, the Millennium Development Goals
(MDGs) set specific targets to be accomplished by 2015:
-
-
-
Halve the proportion of people whose income is less than $1 a day
Halve the proportion of people who suffer from hunger
Ensure that children everywhere will be able to complete a full course of primary
schooling
Reduce by two thirds, between 1990 and 2015, the under-five mortality rate
Reduce by three quarters the maternal mortality rate
Achieve, by 2010, universal access to treatment for HIV/AIDS for all those
who need it
Stop by 2015 and begun to reverse the incidence of malaria and other major diseases
Prior to the global crisis, the Region had made significant advances
in this regard
21
Progress has been made in the MDGs in LAC
15
Percentage Total Population
12
9
13.0
6
11.6
8.0
8.0
8.2
3
3.5
0
1997
2007
People living with less
than US$ 1.00 daily in
LA and the Caribbean
Source: UNSTATS
1990
2006
Children under 5 who
are underweight in
LA and the Caribbean
1990
2006
Under five Mortality
per 100 live births in
LA and the Caribbean
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Most countries recorded progress against hunger and malnutrition
Progress towards the goal on malnutrition – reduction in the percentage of
children under 5 years of age underweight, respect of 1990 levels
México (2006)
Dominican Republic (2002)
Jamaica (2002)
Bolivia (2003)
Venezuela (2005)
Ecuador (2006)
Honduras (2006)
Chile (2004)
Perú (2005)
Guyana (2000)
El Salvador (2003)
Nicaragua (2001)
Colombia (2005)
Guatemala (2002)
Haití (2006)
Brasil (1996)
Panamá (2003)
Uruguay (2004)
Trinidad y Tobago (2000)
Paraguay (2005)
Argentina (2005)
Costa Rica (1996)
122%
102%
96%
82%
81%
79%
76%
69%
69%
Real advance
69%
Expected advance
62%
58%
56%
47%
34%
31%
21%
18%
3%
-27%
-136%
-164%
59%
LA and the Caribbean
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Percentage progress made
Source: ECLAC
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Same in reduction of child mortality rates
Progress towards the MDG on child mortality
Cuba
Perú
Nicaragua
Ecuador
Guadalupe
Chile
El Salvador
México
Brasil
Guatemala
Belice
Argentina
LA and the Caribbean
Panamá
Guyana
Martinica
Barbados
Venezuela
Santa Lucía
Paraguay
S.Vicente y las
Grenada
Suriname
Trinidad y Tobago
Antillas Holandesas
Aruba
0%
10%
20%
30%
40%
Pending
Source: ECLAC
50%
60%
70%
80%
90%
100%
Accomplished
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
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Regarding the MDGs, LA and the Caribbean could be
considered a mild success, compared to other regions
However, with the current global crisis, it is not clear if
the Region will be able to reach the goals set for 2015
Furthermore, progress already made during the last
decade is in jeopardy
The evolution of the social standards depends on how
well governments secure resources and keep social
expenditures at acceptable levels
25
Social expenditure increased during the last decade
35
30
28,7
Social expenditure as a
GDP percentage
25
22,0
19,4
20
18,6
17,7 17,5
15
13,4 13,1 11,7
11,6 10,8
10,2 9,9
10
9,4
8,9
8,0
7,9
7,1
6,3
6,3
5,6
2002-2003
2004-2005
El Salvador
Ecuador
Guatemala
Rep. Dominicana
Paraguay
Panamá
Perú
Jamaica
Nicaragua
Honduras
Venezuela
Chile
Colombia
Costa Rica
2000-2001
Trinidad y Tabago
1990-1991
Uruguay
Bolivia
Argentina
BraSil
Cuba
0
México
5
Source: ECLAC on the basis of official data
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
It is worth noting that:




Public expenditure is a major component of total health
expenditure in many countries
Despite significant improvements in health situation during
the last decade, LA and the Caribbean is still far from an ideal
standard
Health situation in the Region is diverse, with significant
disparities among countries
HIV/AIDS continues to be a critical concern, particularly in
the Caribbean
27
Health Expenditure in LA and the Caribbean, 2006
Per Capita expenditure in Purchase Parity Pow er Dollars
0
250
500
750
1000
1250
1500
1750
2000
A rge nt ina
B a ha m a s
B a rba do s
Urugua y
T rinida d a nd T o ba go
B ra zil
M e xic o
C o s t a R ic a
P a na m a
C hile
LA a nd t he C a ribbe a n
P a ra gua y
P e ru
E c ua do r
G uya na
G ua t e m a la
N ic a ra gua
H o ndura s
J a m a ic a
B o liv ia
Serious disparities are found
in
health
expenditure,
reflecting different degrees
of vulnerability
H a it i
Source: World Health Organization
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And what about HIV/AIDS?
Latin America and Caribbean realities:

By 2007, the estimated number of persons living with HIV
was 1.1 million in LA, and 230 thousand in the Caribbean

Every day, there are 438 new infections and 211 deaths in the
whole LAC area

The Caribbean has the second highest rate of prevalence of
HIV/AIDS in the world

Female/male sex workers are among the most vulnerable
groups

Increase in unemployment and poverty may lead to an increase
in transactional sex and higher exposure to HIV/AIDS
29
HIV/AIDS programmes have expanded
% of persons infected receiving ART treatment
100
95
Antiretroviral
therapy coverage
among persons
with advanced HIV
infections 2007
73
75
58
49
50
46
45
43
43
41
38
25
0
Cuba
Barbados
Trinidad
and
Tobago
Belize
Suriname
Guyana
Jamaica
Bahamas
Haiti
Dominican
Rep.
Source: UNAIDS
The Region, and particularly the Caribbean, has made advances in prevention and
treatment of HIV/AIDS, but we are still far from an ideal situation
30
What about Development Cooperation?
 U.N.
Secretary General, Ban Ki-moon
has recently expressed concerns that the
global economic crisis could reduce the
flow of development assistance and
resources from rich countries to
developing countries
“As the situation is deteriorating ... I am concerned that this may inevitably
affect the political will and available resources for developing countries"
31
What about Development Cooperation?




Leaders in the G-20 summit pledged to provide US$ 1
trillion to the IMF, the World Bank and other
multilateral institutions
Those resources are supposed to provide support to
developing countries hit by the global crisis
The effectiveness of this support will depend on how
well resources are allocated to key economic and social
needs
This requires redoubling efforts to improve
transparency, agility and efficiency in public spending
32
IV. Conclusions





The current world economic crisis would be the worse
since the Great Depression of the 1930s
The crisis would extend to 2010 and could even go
beyond
LA and Caribbean countries will be affected by a variety
of channels
In this scenario, socioeconomic progress could be
reversed, including key issues like the fight against
HIV/AIDS
Thus, it is essential a firm commitment to preserve and
strengthen public spending in health and other social
areas
33
ECLAC Subregional Headquarters for the Caribbean
Thank you for your
attention
34