Not even Brazil and Mexico have the fiscal and monetary leeway to offset those shocks.
By Nick Corbishley and cross-posted from WOLF STREET.
Covid-19 is beginning to gain a foothold in Latin America. Even in some of the region’s tropical areas, the case numbers are rising at a startling rate. Ecuador, which appears to have caught the bug a month ago as a result of its close connections with Spain, now has over 1,300 cases — more than any other country in the region except for Brazil, which has over 12 times Ecuador’s population.
If the virus spreads across Latin America with the same virulence as as it has in Europe, the U.S. and large parts of Asia, the results could be disastrous. The region’s cash-strapped governments simply cannot afford to provide the sort of financial support programs being rolled out in more advanced economies. Even if they could, the measures would not apply to the untold millions of workers eking out a living in the informal economy, most of whom could not afford to miss a day or two of work.
Brazil’s administrative capital Brasilia, which went into lockdown a few days ago, is a case in point. Most of the city’s middle- and upper-class residents, including thousands of politicians and civil servants, are now safely ensconced at home. For the moment, they’re being paid, either to work remotely or just not to go to work. Like many places in Europe, the U.S. and East Asia, the streets in the downtown area are more or less deserted.
But once you venture out into the city’s poorer suburbs, the reality changes. Thelma, a friend who lives in Brasilia, just visited nearby Valparaíso de Goias, which is roughly an hour’s drive from the capital. “It was just like any other day in the city,” she said. “The streets were teeming with people. The buses were rammed, as were the bars, restaurants and shops. These people can’t afford to take a day off, let alone two or three weeks”…