1 eclac subregional headquarters for the caribbean global crisis and government’s responses in la...
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ECLAC Subregional Headquarters for the Caribbean
Global crisis and Global crisis and Government’s responses in Government’s responses in
LA and the CaribbeanLA and the Caribbean economic and social implicationseconomic and social implications
Jamaica, June 2009Jamaica, June 2009
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OutlineOutline
I.I. The global economic crisisThe global economic crisis
II.II. Impact in LA and the Impact in LA and the CaribbeanCaribbean
III.III. Policy responsesPolicy responses
IV.IV. Social implicationsSocial implications
V.V. ConclusionsConclusions
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I. The global I. The global economic crisiseconomic crisis
4
In middle 2007 the U.S. economy was confronted In middle 2007 the U.S. economy was confronted by the bursting of the real estate bubbleby the bursting of the real estate bubble
This resulted in unprecedented losses for banks This resulted in unprecedented losses for banks with large holdings of mortgage-backed securitieswith large holdings of mortgage-backed securities
Eventually, those banks became insolvent putting Eventually, those banks became insolvent putting the international financial markets under risk of the international financial markets under risk of collapsingcollapsing
The panic and uncertainty in the financial markets The panic and uncertainty in the financial markets quickly translated into a sharp credit contractionquickly translated into a sharp credit contraction
A contagion effect with the real economy A contagion effect with the real economy developed all around the world, unleashing a developed all around the world, unleashing a global recessionglobal recession
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GDP Growth 2008 – 2010
20082009
Projection
2010 Projectio
n
Global Economy 3.2 -0.75 2.0
United States 0.8 -3.25 0.25
Euro Zone 1.1 -2.6 0.2
Japan -0.7 -5.8 -0.2
Emerging and Developing Countries
6.1 2.0 4.0
Source: IMF, March 2009Source: IMF, March 2009
In 2009, the world economy will contract for the first In 2009, the world economy will contract for the first time since World War II, and most forecasts agree that time since World War II, and most forecasts agree that this recession will continue well into 2010this recession will continue well into 2010
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II. Economic II. Economic implications in LA implications in LA and the Caribbeanand the Caribbean
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How does the crisis filter to the LA and Caribbean economies?
The Real SectorThe Real Sector Decline in volume of exportsDecline in volume of exports Deterioration of terms of tradeDeterioration of terms of trade Reduction in remittancesReduction in remittances Slowdown in tourism activitySlowdown in tourism activity Reduction in Foreign Direct Investment Reduction in Foreign Direct Investment
flowsflows
The Financial SectorThe Financial Sector Tighter and more expensive access to Tighter and more expensive access to
external and domestic financingexternal and domestic financing
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LA and the Caribbean economies will slow dramatically in 2009
- 2. 5- 2. 0- 2. 0
- 1. 0- 0. 5- 0. 5
- 0. 30. 00. 0
0. 10. 50. 50. 50. 5
1. 01. 0
1. 41. 51. 51. 51. 51. 5
2. 02. 0
2. 53. 03. 0
3. 53. 5
4. 0
-3 -2 -1 0 1 2 3 4 5
J amaicaBarbados
MexicoBrasi l
Costa RicaParaguay
LA and the Car ibbeanChi le
EcuadorCar ibeBahama
El SalvadorHai ti
ColombiaVenezuelaNicaragua
ECCU Countr iesArgentinaGuatemala
Tr inidad and TobagoHonduras
Dominican Republ i cBel i zeGuyana
UruguayBol ivia
CubaSur iname
PeruPanama
Expected GDP Growth, 2009
Source: Source: ECLAC on the basis of official dataECLAC on the basis of official data
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0 5 10 15 20 25 30
América del SurArgentina
BoliviaBrazilChile
ColombiaEcuador
ParaguayPeru
UruguayVenezuela (R.B.)
CentroaméricaCosta RicaEl SalvadorGuatemala
HaitiHondurasNicaragua
PanamaRepublica Dominicana
MexicoCaribe
BahamasBarbados
BeliceDominicaGranadaGuyanaJamaica
San Kitts and NevisSanta Lucia
San Vincent and theSuriname
Trinidad and TobagoAmérica Latina y el Caribe
The fall in tourism activity will particularly affect the Caribbean
LA and the Caribbean: Exports of Services related to the Tourism Sector, 2007
(Percentage of GDP)
Source: Source: ECLAC on the basis of official dataECLAC on the basis of official data
10
The prices of our commodities have gone down
Source: Source: ECLACECLAC
50
100
150
200
250
300
350
400
450
500
Food Minerals Oil
Commodities Index (2000 = 100)
11
The contraction of FDI will affect most to the smaller Caribbean and Central America economies
-2 0 2 4 6 8 10 12 14 16 18 20 22 24 26
Venezuela
Haití
Paraguay
Ecuador
Brasil
Argentina
Bolivia
México
América del Sur
El Salvador
Guatemala
América Latina y el Caribe
Caribe
Colombia
Centroamérica
Uruguay
Perú
R. Dominicana
Chile
Nicaragua
Honduras
Costa Rica
Bahamas
Panamá
Belice
Dominica
Saint Kitts y Nevis
San Vicente y las Granadinas
Granada
Antigua y Barbuda
Source: Source: ECLACECLAC
Net Foreign Direct Investment, 2008(percentage of GDP)
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Remittances from migrants stagnated in 2008 and will probably contract in 2009
Source: Source: The World BankThe World Bank
p = preliminaryp = preliminary
13.6%
21.2%
15.1%
25.4%
18.8%16.8% 17.8%
6.4%
0.1%0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 p
An
nu
al
gro
wth
ra
te
Growth rate in workers’ remittances to LA and the
Caribbean
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III. Policy Responses III. Policy Responses in LA and the in LA and the
CaribbeanCaribbean
14
Governments in LA and the Caribbean have not Governments in LA and the Caribbean have not been idle watching the crisis unfoldbeen idle watching the crisis unfold
So far, the policy response has been mostly So far, the policy response has been mostly characterized by:characterized by:
Stimulus efforts majorly based on expanded Stimulus efforts majorly based on expanded public expenditurepublic expenditure
Increased role and intervention of the state in the Increased role and intervention of the state in the economyeconomy
Appeals for credit from multilateral agencies and Appeals for credit from multilateral agencies and financial markets to cover budget imbalancesfinancial markets to cover budget imbalances
Efforts to preserve/increase social expenditure to Efforts to preserve/increase social expenditure to protect advances made during the last decadeprotect advances made during the last decade
15
The response to the global crisis has been at the centre of the public agenda
1718
17 17 17
8
13
810
11
0
5
10
15
20
25
Monetary andFinancial Policy
Fiscal Policy Exchange Rate andTrade Policy
Sectorial Policy Labor and SocialPolicy
Nu
mb
er
of
co
un
trie
s
LA countries where policy measures have beenadopted/proposed as of March/April 2009
Caribbean countries where policy measures have beenadopted/proposed as of March/April 2009
Source: Source: ECLAC on the basis of official data from 20 LA countries and 14 Caribbean ECLAC on the basis of official data from 20 LA countries and 14 Caribbean countries surveyedcountries surveyed
16
Policy response in Latin America and the Caribbean
Source: Source: ECLAC on the basis of official data as of March/April 2009ECLAC on the basis of official data as of March/April 2009
Monetary and Financial Policies
Fiscal PoliciesExchange Rate and
Foreign Trade PoliciesSectorial Policies Labour and Social Policies
Argentina X X X X XBolivia X X X X XBrazil X X X X XChile X X X X XColombia X X X X XCosta Rica X X X X XCubaDominican Republic X X X X XEcuador X X XEl Salvador X X X X XGuatemala X X X X XHaiti X XHonduras X X X X XMexico X X X X XNicaragua X X X X XPanama X X X XParaguay X X X X XPeru X X X X XUruguay X X X X XVenezuela X X
Bahamas X X X XBarbados X X X XBelize X X X X XGuyana X X X X XJamaica X X X X XSuriname X X XTrinidad and Tobago X X X
Anguila XAntigua and Barbuda X X X XDominica X X XGrenada X XSaint Kitts and Nevis X X X XSaint Lucia X X XSaint Vincent and the Grenadines X X X X
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IV. The Social IV. The Social ImplicationsImplications
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Regardless of efforts by Regardless of efforts by governments, it is clear that the governments, it is clear that the global crisis will still affect the global crisis will still affect the Region negativelyRegion negatively
Some major social concerns:Some major social concerns: Rising unemploymentRising unemployment Set back in poverty reductionSet back in poverty reduction Increased civilian unrestIncreased civilian unrest Increased criminalityIncreased criminality Worsening of health statusWorsening of health status
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50
51
52
53
54
55
56
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
6
7
8
9
10
11
12
Regional employment rate Regional unemployment rate
Unemployment is expected to rise in LAC
Source: Source: ECLAC on the basis of official data as of March 2009ECLAC on the basis of official data as of March 2009
Unemployment in the Region would rise from 7.5% in 2008 up to 8.5% or 9% in 2009
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Poorer families are more vulnerable to Poorer families are more vulnerable to unemployment and loss of revenueunemployment and loss of revenue
Usually poorer families are also the ones Usually poorer families are also the ones with the worst access to health care, with the worst access to health care, educational services, food security, etc.educational services, food security, etc.
The increment of unemployment in the The increment of unemployment in the Region would be reflected in an increase Region would be reflected in an increase in poverty rates and health issues, like in poverty rates and health issues, like malnutritionmalnutrition
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A key issue: the Millennium Development Goals
Established by the UN in 2000, the Millennium Established by the UN in 2000, the Millennium Development Goals (MDGs) set specific targets to Development Goals (MDGs) set specific targets to be accomplished by 2015:be accomplished by 2015:
- Halve the proportion of people whose income is less than $1 a Halve the proportion of people whose income is less than $1 a dayday
- Halve the proportion of people who suffer from hungerHalve the proportion of people who suffer from hunger- Ensure that children everywhere will be able to complete a full Ensure that children everywhere will be able to complete a full
course of primary schoolingcourse of primary schooling- Reduce by two thirds, between 1990 and 2015, the under-five Reduce by two thirds, between 1990 and 2015, the under-five
mortality ratemortality rate- Reduce by three quarters the maternal mortality rateReduce by three quarters the maternal mortality rate- Achieve, by 2010, universal access to treatment for Achieve, by 2010, universal access to treatment for
HIV/AIDS for all those who need itHIV/AIDS for all those who need it- Stop by 2015 and begun to reverse the incidence of malaria and Stop by 2015 and begun to reverse the incidence of malaria and
other major diseasesother major diseases
Prior to the global crisis, the Region had made Prior to the global crisis, the Region had made significant advances in this regardsignificant advances in this regard
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11.6
8.0
13.0
8.0 8.2
3.5
0
3
6
9
12
15
1997 2007 1990 2006 1990 2006
Per
cen
tag
e T
ota
l P
op
ula
tio
n
Progress has been made in the MDGs in LAC
People living with less than US$ 1.00 daily in LA and the Caribbean
Children under 5 who are underweight in LA and the Caribbean
Under five Mortality per 100 live births in LA and the CaribbeanSource: Source: UNSTATSUNSTATS
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-136%
-27%
3%
59%
18%
21%31%
34%47%
56%
58%
62%
69%
69%
69%
76%
79%
81%
82%
96%102%
122%
-164%
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
LA and the Caribbean
Costa Rica (1996)Argentina (2005)Paraguay (2005)
Trinidad y Tobago (2000)Uruguay (2004)Panamá (2003)
Brasil (1996)Haití (2006)
Guatemala (2002)Colombia (2005)Nicaragua (2001)
El Salvador (2003)Guyana (2000)
Perú (2005)Chile (2004)
Honduras (2006)Ecuador (2006)
Venezuela (2005)Bolivia (2003)
Jamaica (2002)Dominican Republic (2002)
México (2006)
Percentage progress made
Real advance
Expected advance
Most countries recorded progress against hunger and malnutrition
Source: Source: ECLAC ECLAC
Progress towards the goal on malnutrition – reduction in the percentage of children under 5 years of age underweight, respect of 1990 levels
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
ArubaAntillas Holandesas
Trinidad y TobagoSurinameGrenada
S.Vicente y lasParaguay
Santa LucíaVenezuelaBarbadosMartinicaGuyana Panamá
LA and the Caribbean
ArgentinaBelice
Guatemala Brasil
MéxicoEl Salvador
ChileGuadalupe
EcuadorNicaragua
PerúCuba
Pending Accomplished
Source: Source: ECLAC ECLAC
Same in reduction of child mortality rates
Progress towards the MDG on child mortality
25
Regarding the MDGs, LA and the Caribbean Regarding the MDGs, LA and the Caribbean could be considered a mild success, compared could be considered a mild success, compared to other regionsto other regions
However, with the current global crisis, it is However, with the current global crisis, it is not clear if the Region will be able to reach the not clear if the Region will be able to reach the goals set for 2015goals set for 2015
Furthermore, progress already made during Furthermore, progress already made during the last decade is in jeopardythe last decade is in jeopardy
The evolution of the social standards depends The evolution of the social standards depends on how well governments on how well governments secure resources and secure resources and keep social expenditures at acceptable levelskeep social expenditures at acceptable levels
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5,66,36,37,17,98,08,99,49,910,2
13,113,4
17,517,718,6
19,4
22,0
28,7
10,811,7 11,6
0
5
10
15
20
25
30
35
Cu
ba
Bra
Sil
Arg
en
tin
a
Bo
livia
Uru
gu
ay
Co
sta
Ric
a
Co
lom
bia
Ch
ile
Ve
ne
zu
ela
Ho
nd
ura
s
Nic
ara
gu
a
Mé
xic
o
Ja
ma
ica
Tri
nid
ad
y T
ab
ag
o
Pe
rú
Pa
na
má
Pa
rag
ua
y
Re
p.
Do
min
ica
na
Gu
ate
ma
la
Ecu
ad
or
El S
alv
ad
or
1990-1991 2000-2001 2002-2003 2004-2005
Social expenditure increased during the last decade
Social expenditure Social expenditure as a GDP as a GDP percentagepercentage
Source: Source: ECLAC on the basis of official dataECLAC on the basis of official data
27
It is worth noting that:It is worth noting that: Public expenditure is a major component of Public expenditure is a major component of
total health expenditure in many countriestotal health expenditure in many countries Despite significant improvements in health Despite significant improvements in health
situation during the last decade, LA and the situation during the last decade, LA and the Caribbean is stillCaribbean is still far from an ideal standard far from an ideal standard
Health situation in the Region is Health situation in the Region is diversediverse, with , with significant disparities among countriessignificant disparities among countries
HIV/AIDS continues to be a critical concern, HIV/AIDS continues to be a critical concern, particularly in the Caribbeanparticularly in the Caribbean
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Health Expenditure in LA and the Caribbean, 2006
0 250 500 750 1000 1250 1500 1750 2000
Argentina
Bahamas
Barbados
Uruguay
Trinidad and Tobago
Brazil
Mexico
Costa Rica
Panama
Chile
LA and the Caribbean
Paraguay
Peru
Ecuador
Guyana
Guatemala
Nicaragua
Honduras
J amaica
Bolivia
Haiti
Per Capita expenditure in Purchase Parity Power Dollars
Source: Source: World Health OrganizationWorld Health Organization
Serious disparities are found in health expenditure, reflecting different degrees of vulnerability
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And what about HIV/AIDS?And what about HIV/AIDS?
Latin America and Caribbean realities:Latin America and Caribbean realities: By 2007, the estimated number of persons living By 2007, the estimated number of persons living
with HIV was with HIV was 1.1 million1.1 million in LA, and in LA, and 230 230 thousandthousand in the Caribbean in the Caribbean
Every day, there are Every day, there are 438 new infections and 211 438 new infections and 211 deathsdeaths in the whole LAC area in the whole LAC area
The Caribbean has the The Caribbean has the second highest rate of second highest rate of prevalenceprevalence of HIV/AIDS in the world of HIV/AIDS in the world
Female/male sex workersFemale/male sex workers are among the most are among the most vulnerable groupsvulnerable groups
Increase in unemployment and poverty may lead Increase in unemployment and poverty may lead to an to an increase in transactional sex and higher increase in transactional sex and higher exposureexposure to HIV/AIDS to HIV/AIDS
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HIV/AIDS programmes have expanded
The Region, and particularly the Caribbean, has made advances The Region, and particularly the Caribbean, has made advances in prevention and treatment of HIV/AIDS, but we are still far in prevention and treatment of HIV/AIDS, but we are still far from an ideal situationfrom an ideal situation
95
73
58
4946 45 43 43 41
38
0
25
50
75
100
Cuba Barbados Trinidadand
Tobago
Belize Suriname Guyana Jamaica Bahamas Haiti DominicanRep.
Source: UNAIDS
% o
f p
ers
on
s in
fec
ted
re
ce
ivin
g A
RT
tre
atm
en
t Antiretroviraltherapy coverageamong personswith advanced HIVinfections 2007
31
U.N. Secretary General, Ban U.N. Secretary General, Ban Ki-moon has recently Ki-moon has recently expressed concerns that the expressed concerns that the global economic crisis could global economic crisis could reduce the flow of reduce the flow of development assistance and development assistance and resources from rich countries resources from rich countries to developing countriesto developing countries
““As the situation is deteriorating ... I am concerned As the situation is deteriorating ... I am concerned that this may inevitably affect the political will and that this may inevitably affect the political will and available resources for developing countries"available resources for developing countries"
What about Development What about Development Cooperation?Cooperation?
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Leaders in the G-20 summit pledged to Leaders in the G-20 summit pledged to provide US$ 1 trillion to the IMF, the provide US$ 1 trillion to the IMF, the World Bank and other multilateral World Bank and other multilateral institutionsinstitutions
Those resources are supposed to provide Those resources are supposed to provide support to developing countries hit by the support to developing countries hit by the global crisisglobal crisis
The effectiveness of this support will The effectiveness of this support will depend on how well resources are depend on how well resources are allocated to key economic and social allocated to key economic and social needsneeds
This requires redoubling efforts to This requires redoubling efforts to improve transparency, agility and improve transparency, agility and efficiency in public spendingefficiency in public spending
What about Development What about Development Cooperation?Cooperation?
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IV. ConclusionsIV. Conclusions The current world economic crisis would be The current world economic crisis would be
the worse since the Great Depression of the the worse since the Great Depression of the 1930s1930s
The crisis would extend to 2010 and could The crisis would extend to 2010 and could even go beyondeven go beyond
LA and Caribbean countries will be affected LA and Caribbean countries will be affected by a variety of channelsby a variety of channels
In this scenario, socioeconomic progress In this scenario, socioeconomic progress could be reversed, including key issues like could be reversed, including key issues like the fight against HIV/AIDSthe fight against HIV/AIDS
Thus, it is essential a firm commitment to Thus, it is essential a firm commitment to preserve and strengthen public spending in preserve and strengthen public spending in health and other social areashealth and other social areas
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Thank you for Thank you for your attentionyour attention
ECLAC Subregional Headquarters for the Caribbean