August 5, 2020

More than 2.7 million formal companies will close in Latin America due to the pandemic



The halting of productive activities due to the pandemic of the new coronavirus will cause the closure of 2.7 million formal companies in Latin America, most of them micro-businesses, which will entail the destruction of 8.5 million jobs, ECLAC said Thursday. .

“The impact of the crisis will be very different depending on the sector and the type of company,” Alicia Bárcena, executive secretary of the Economic Commission for Latin America (Eclac), said in a virtual press conference.

The most affected will be micro and small companies, on which the sectors hardest hit by sanitary measures depend to stop the virus from spreading, such as commerce, hotels and restaurants, according to the new study by the organization of the Un

Commerce, for example, will lose 1.4 million companies and 4 million jobs, while tourism will destroy at least 290,000 companies and one million jobs.

“The crisis is hitting the industrial sectors potentially with greater technological dynamism with greater intensity and, therefore, will deepen the structural problems of the economies of the region,” lamented Bárcena.

If adequate policies are not implemented to strengthen these productive branches, he added, “there is a high probability that a regressive structural change will be generated that would lead to the reprimarization of the region’s economies.”

AMERICA, EPICENTER OF THE PANDEMIC

The American continent is currently one of the main global outbreaks of the pandemic. The United States, Brazil and Russia account for more than 40% of global cases and other Latin Americans such as Mexico, Peru and Chile are also in the ranking of the most affected countries, according to the John Hopkins University.

Most Latin American economies remain semi-paralyzed, although several countries are slated to reopen non-core sectors in the coming weeks.

“It is important that the reopens be orderly, that they are not disorderly, that they are not so fast that they immediately lead to additional confinement,” Bárcenas urged.

According to the report, the vast majority of companies in the region have registered significant falls in their income and present difficulties in maintaining their activities, as they have “serious problems” in accessing financing and meeting their salary and financial obligations.

The UN agency recommended that governments adopt a series of measures to support companies, including extending the deadlines and scope of the lines of intervention in the area of ​​liquidity and financing and co-financing the payroll for six months to avoid destruction of capacities.

This co-financing, which is estimated to have a cost equivalent to 2.7% of regional GDP, must occur in different proportions depending on the size of the company, from 30% in large companies to 80% in micro-companies, according to the document. .

Direct transfers to self-employed workers were also advised. and Support large companies in strategic sectors that are seriously affected by the crisis, “as they provide 39% of formal employment and more than 90% of exports,” the report noted.

“The recovery of the business sector will be slow and gradual and the economic recovery much slower than expected,” said the executive secretary.

According to ECLAC, the pandemic of the new SARS-CoV-2 coronavirus will cause the worst recession in the history of Latin America, with a contraction of regional GDP of 5.3% this year and an increase in the poverty rate of 30.3 % to 34.7% of the population.

“The crisis highlights the need to move towards a new development model. Emergency policies are necessary and a strategy must be implemented to overcome the structural weaknesses of the economies and societies,” concluded Bárcena.

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