Experts Examine Latin America’s Economic, Political, and Social Challenges in 2022
In a March 17 event Muni Jensen, a senior advisor with Albright Stonebridge Group and Georgetown Americas Institute consultant, moderated a panel discussion among leading experts on Latin America that addressed the region’s economic recovery, social protection systems, disenchantment with democracy, and market performance in 2022.
Co-sponsored by the Georgetown Americas Institute (GAI), Center for Latin American Studies, Latin America Leadership Program, and Center for Advancement of the Rule of Law in the Americas at Georgetown University, panelists included Alejandro Werner, Marcela Meléndez, Hector Schamis, and José Luis Daza.
Economic Recovery After COVID-19
Alejandro Werner, founding director of GAI, began by discussing economic growth in Latin America. In 2022, economic growth in the region was downgraded to a mere 2.4%, which analysts consider too low to maintain a sustainable economic recovery from the COVID-19 pandemic.
“Latin America suffered the deepest economic contraction during the pandemic,” Werner said. “Latin America was the world region hit worse by COVID-19, both from a public health aspect and the economic aspect.”
One positive note is that Latin America did much better in 2021 than expected, particularly with vaccination campaigns. However, GDP per capita in 2025 is predicted to be at the same level as in 2015, leading some to call this another lost decade for Latin America.
“Latin America needs to try to establish a much more dynamic growth process,” Werner said. “It will need to deal with important fiscal sustainability issues, as well as a legitimacy problem of the socioeconomic system that has given way to social unrest in the last five to 10 years.”
Labor Markets and Education
Marcela Meléndez, chief economist for Latin America and the Caribbean at the United Nations Development Programme, noted the prominence of the informal sector in the region, with nearly 60% of workers either being self-employed or in a small business of less than five employees. Once the COVID-19 pandemic hit the region, informal workers suffered the most due to lack of social protection.
“In the context of the pandemic, what informality meant was invisibility. Latin America was already in poor shape to face the pandemic, and the socioeconomic outcomes that we have seen are the result of pre-existing conditions.”
Looking forward, Meléndez suggested that the region needs to rethink its labor markets and explore the possibility of universal social insurance systems. This will require quality education systems, which remains the greatest social challenge moving forward.
The State of Democracy
Hector Schamis, adjunct professor in the Center for Latin American Studies, provided a historical overview of democracies in Latin America within the context of the Cold War up to the present. He insisted that the region needs to ask whether or not it wants to promote fundamental freedoms within a democratic framework.
“The region is slowly going in the direction of autocracy, of a single party regime, such as has been the case in Cuba,” Schamis said. “For us in Latin America, we need to do so serious soul-searching. Where do we want to belong?”
Hope in Market Performance
José Luis Daza, founder and CIO of QFR Capital Management, L.P., examined the behavior of central banks in Latin America in light of current global finance. The narrative surrounding markets in Latin America is usually negative, focusing on how central banks tighten monetary policy during economic crises. However, the narrative for 2020 proved to be different.
“What is extraordinary is that during the pandemic, countries were able to dramatically lower interest rates,” Daza said. “The central banks in Latin America have done a very good job with monetary policy. In a continent with weak institutions, the central banks have been outstanding.”
Even though inflation rates are still high, central banks have acted quickly during the pandemic to lower inflation. According to Daza, the outlook for markets in Latin America during the next two years should be positive.
“The central banks learned their lesson, allowing exchange rates to work the way they should. We have avoided the crises of the past, the central banks have acted prudently, and the commodity prices for many countries will remain steady.”