Financing for development in the era of COVID-19 and beyond

In 2020, the Latin American and Caribbean region faced the worst crisis on historical record and the sharpest economic contraction (-7.7% and -20%, respectively, in GDP and investment growth for 2020) within the developing world. The available data also show that the contraction of investment relative to that of GDP was greater in Latin America and the Caribbean than in other developing regions. The pandemic has magnified the structural and institutional gaps of Latin America and the Caribbean.4 The crisis has severely impacted productive structures, resulting in the closure of more than 2.7 million firms, and the labour market, as the number of jobless persons has escalated to 44.1 million. Significant firm closures and employment losses, jointly with the fact that the more vulnerable segments of the population have borne the brunt of the crisis, have pushed up poverty levels from 185.5 to 209 million people (from 30.3% to 33.7% of the total population). Meanwhile, extreme poverty will increase by 8 million, to 78 million people. Also, the sharp contraction of investment will constrain future capital accumulation and the capacity of the region’s economies to generate growth and employment. The region’s economic and social development is likely to be set back for at least a decade. By the end of 2020, the level of per capita GDP was equal to that of 2010.