Alicia Bárcena is the executive director of Cepal. (Free Press Photo: DW)
Alicia Bárcena is the maximum representative of ECLAC. Along with other high-ranking officials, in mid-May he presented the third special report of the organization on the pandemic, entitled ‘The social challenge in times of COVID-19’, in which he proposes an emergency basic income for at least six months for the third of low-income population throughout Latin America.
Deutsche Welle: The scenario your report sets is bleak. But, even so, the starting forecasts are even optimistic.
Alicia Bárcena: We have made these forecasts, very complicated, contemplating a contraction of 5.3% of regional GDP. But it can indeed drop even more. And that is especially because our economies in the region also depend a lot on what happens in Europe and in the United States. Both are already in a much deeper fall than the recession that we had. At least in Europe there are broader and more coverage social protection systems, in our region we really have a very serious problem because there are many people without health coverage and many people who do not have access to the pension, for example, or to income in any sense. And this is the framework of our proposal for a basic income, for the time being of an emergency.
What would happen if social measures were not taken?
We estimate unemployment of more than 12 million additional people, from 8.1% to 8.5% unemployment. If no action is taken, poverty would increase dramatically in the region: from 186 million to 214 million people. And extreme poverty from 11% to 13.5% of the population, from 67 million to 83 million. Obviously we are talking about a very heterogeneous region. In terms of inequality, there will also be a very worrying increase in the Gini coefficient in countries like Brazil, such as Colombia, Argentina, Ecuador or Mexico, which are countries that already come with a disadvantage. And it is a region that had made a great effort to lift people out of poverty and had made progress in improving social mobility, and now we have a great setback again, especially among the middle and low income strata.
But neither can it be said that nothing is being done … Isn’t that enough?
Very important steps have been taken. The entire region is making great efforts, mainly reflected in fiscal cash transfers, to give food aid to households, for example, covering 58% of the population, or forgiving the payment of some basic services. These are very important measures, but it is insufficient because these transfers are punctual, or very limited, as in Chile, whose aid will be reduced over two months. We are saying that an emergency basic income equivalent to the poverty line, which is around 140 dollars a month (on average, there are countries where the poverty line is higher), should be given to 215 million people. , which are those that are below that poverty line. Here we are not talking, for the moment, of a universal basic income, but of emergency, for the poorest. And we are building on the basis of what countries are already doing. Today they are investing around 2.22% of GDP per year in conditional transfers, in social aid and other types of social policies per year. And with the crisis they are investing an additional 0.7% of GDP, with which we are already reaching 2.9% of GDP. Now, if we wanted to protect people with an emergency basic income for one year it would cost an additional 4.9%, if it were for six months it would mean 2.1% of GDP. And we believe that there are countries that do have fiscal margin to do so.
How would this basic emergency income be paid?
Unfortunately there is no way to finance this simply by reorienting national budgets. Everyone is coming to a stop. Obviously, there are countries that have more fiscal space than others, such as Peru, Colombia, Chile … Mexico itself, which even has better access to markets. Or even that they have emergency lines of credit with the International Monetary Fund. But we have the problem with other countries, where there is no fiscal space and they do not have the level of reserves that they would like. We are considering three options: one is to resort to international financial institutions. In the case of Central America or the Caribbean we propose debt moratoriums. The interest payment of the central government public debt in the Central American countries is around 2.6% of the GDP per year, that exceeds what we propose to allocate to aid, which is 2.1%. So if the interests could be postponed to 2020, there is a bit of fiscal space there for these countries. And the third is to be able to access emergency credit lines with zero interest cost. Like developed countries, they have much cheaper access to financing.
You also allude in your report that it would be a way of minimally sustaining consumption.
It really is very important. And I think the economy in general is going to move more towards a more regionalized, less globalized economy. I have the impression that this zero stock policy and that everything was bought on the spot and traveled, has shown great fragility. Because now all the medical equipment, the medicines that this region needs, are not getting to where they are needed on time. And this has once again been a demonstration of the great fragility of the region that only produces 4% of these much-needed medical supplies.