Health and the economy: a convergence needed to address COVID-19 and retake the path

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean Alicia Bรกrcena

Carissa Etienne

Executive Secretary Economic Commission for Latin America and the Caribbean (ECLAC)

Director Pan American Health Organization (PAHO)

30 July 2020

COVID-19 has thrown a spotlight on the structural relationship between health and the economy and revealed the structural weaknesses of the health system • Health care is a fundamental human right and a public good that must be guaranteed by the State.

• Universal access to good-quality health systems is essential to well-being and to inclusive and sustainable economic development.

• Health is an integral component of human capital and directly affects people’s productivity and social performance.

• The health sector is an economic area with extensive production chains; it generates employment and investment and accounts for an increasing share of GDP.

• Segmented and fragmented systems with gaps in access.

• Public spending is well below the target of 6.0% of GDP recommended by PAHO, averaging just 2.3% of central government GDP. • Out-of-pocket spending by households accounts for more than one third of health expenditure (34%).

• Close to 95 million people face catastrophic health expenses, with almost 12 million falling into poverty as a result.

• The availability of doctors and hospital beds is half the level seen in OECD countries.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

COVID-19 is the biggest economic and social crisis faced by Latin America and the Caribbean, and has revealed the structural problems of the region’s development model • Many countries of the region are at the epicentre of the pandemic and are among the countries with the highest rates of infection in the world.

• Growing inequality, poverty, social and economic vulnerability, and gender and ethnicity gaps have exacerbated the effects of the pandemic in the region.

• Infection rates are worse in highly urbanized areas. More than one third of the population live in cities of one million or more inhabitants, with high rates of overcrowding.

• High levels of labour informality and weak social protection systems have exacerbated the economic and social effects of the pandemic.

• Moreover, the pandemic has emerged amid a complex economic, social and political context of weak growth and rising social tensions.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

More than 140,000 new daily cases of COVID-19, on average, in the past week THE AMERICAS (53 COUNTRIES AND TERRITORIES): NEW CASES OF COVID-19 BY DATE, 2 MARCH–27 JULY 2020 (Number of cases and 7-day moving average)

7-day moving average

Source: Pan American Health Organization (PAHO), based on COVID-19 data provided by the countries.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

The worst crisis in a century: 9.1% decline in GDP, 37.3% of the population living in poverty (231 million), 98 million living in extreme poverty and unemployment at 13.5% Demand- and supply-side crisis: the worst in history Regional exports set to fall by 23% A lost decade: per capita income will slip back to 2010 levels Unemployment will rise to 13.5%, with 44 million unemployed: increased risk of segmentation, precarious conditions and polarization in labour markets • Closure of 2.7 million formal businesses • • • •

Latin America and the Caribbean: projected growth

Latin America: poverty and extreme poverty

Latin America and the Caribbean: exports

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Increasing health vulnerability could lead to a food crisis • Risk of food crisis: more than 96 million people are living in extreme poverty (11.8% of the urban population and 29% of the rural population).

• Early warning signs: lower household income allocated to food basket combined with lower nutritional quality.

• Caribbean SIDS, the Central America Dry Corridor, Haiti and the Bolivarian Republic of Venezuela are most vulnerable.

• Governments have taken major steps, but not enough to bridge the sizeable gap. The risk of a food crisis is real.

• Civil society is playing a key role (food banks, NGOs, foundations, local communities)

Latin America: People living in extreme poverty (Millions)

Latin America: extreme poverty in rural and urban areas (Percentages of the population)

Latin America: extreme poverty in rural and urban areas (Thousands of persons)

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Heightened inequality: sharp increase in the Gini index in a region already considered the most unequal in the world LATIN AMERICA (17 COUNTRIES): PROJECTED VARIATION IN THE GINI INDEX IN 2020

Between 1.0% and 1.9% Between 2.0% and 2.9% Between 3.0% and 3.9%

Between 4.0% and 4.9% Between 5.0% and 5.9%

6.0% or more

Guatemala Paraguay Honduras Nicaragua Bolivia (Plurinational State of) Costa Rica Panama Dominican Republic Colombia Uruguay Brazil Chile El Salvador Mexico Argentina Ecuador Peru

• The region’s Gini index will be 4.9 percentage points higher in 2020 than in 2019.

• Increase by between 1% and 8% across countries.

• In the region, 8 out of 10 people (491 million) will have incomes of less than three times the poverty line, some US$ 500 a month.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Groups that are particularly vulnerable to the pandemic and have fragmented access to health care • Older persons: 85 million (13%) are at risk of infection and are more likely to die, owing to co-morbidity and a lack of protection.

• Informal workers: account for 54% of total employment, higher infection rate, no social protections.

• Women: in the formal and informal sectors, and those with the highest infection rates, such as health care (72.8% women). More vulnerable to job losses, fewer social protections, heavier burden of unpaid work, at greater risk of domestic violence and limited access to sexual and reproductive health services.

• Indigenous peoples: 60 million, 9.3% of the population, covering more than 800 different peoples. Fewer protections, more severely affected and higher mortality. Entire communities may disappear.

• Afrodescendants: 130 million people in 2015, 21% of the regional population. Greater risk of infection, more severely affected and higher mortality, and hit harder by the crisis.

• Persons with disabilities: 70 million people, 12.5% in Latin America, and 6.1% in the Caribbean.

More severely affected and higher mortality.

• Migrants: at high risk of infection, unprotected and discriminated against, which could restrict their access to health care, limited support networks in destination countries, restrictions on their movement and on the possibility of returning to their countries of origin.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

More than a decade lost: at year-end 2020, per capita GDP is set to lose more than 10 years of growth, and poverty levels have been set back by 14 years LATIN AMERICA AND THE CARIBBEAN: PER CAPITA GDP (Index 1990=100)

LATIN AMERICA : POVERTY LEVELS (Percentages) 50

230 210

45

190

Reversal in poverty levels: 14 years

2010

170

40

150

35

130 30

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

90

25 19 90 19 94 19 97 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20

110

Source: Economic Commission for Latin America and the Caribbean, on the basis of official data.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Convergence of health, economic and social policies • It will not be possible to reopen the economy until the infection curve has been brought under control, and economic recovery will not be possible without a clear plan to prevent a new wave of infections through testing, tracing and self-isolation.

• The health measures to bring the pandemic under control (including lockdowns and physical distancing) must be accompanied by social and economic measures to mitigate the impact of the crisis, since these accompanying measures foster compliance with the health measures.

• Without controlling the pandemic, it is impossible to think about reopening.

• Focus recovery efforts on closing gaps in socioeconomic determinants of health and health systems.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Five proposals 1. Emergency basic income for six months for the entire population living in poverty, accompanied by an anti-hunger grant for the entire population living in extreme poverty.

2. Universal, progressive, redistributive social policies.

3. Extension of repayment terms and grace periods for lending to MSMEs, especially those that produce food, and co-financing of payrolls.

4. Expansionary fiscal and monetary policies, to support a longer period of spending (which will be structural) with non-conventional instruments.

5. Access to financing under favourable conditions for middle-income countries.

Emergency basic income for six months (Percentages of GDP)

Anti-hunger grant Percentages of GDP

Billions of dollars

Measures for enterprises (Percentages of GDP)

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

An emergency basic income to meet the basic needs and support the consumption of households living in poverty LATIN AMERICA (18 COUNTRIES): ESTIMATED ADDITIONAL COST OF CASH TRANSFERS EQUIVALENT TO ONE POVERTY LINE TO ADDRESS THE IMPACT OF THE COVID-19 PANDEMIC, BY DURATIONa (Percentages of GDP)

PERSONS LIVING IN POVERTY

• Countries have increased the duration, coverage and amount of emergency transfers to protect the income of vulnerable populations and those living in poverty.

• Emergency spending on cash and in-kind transfers is equivalent to 1.3% of GDP. • The cost of providing an emergency basic income for all people living in poverty equivalent to one poverty line (US$ 143 in 2010 dollars) for 6 months would be equivalent to 2% of regional GDP and 3.6% for 9 months.

• Complement with an anti-hunger grant equivalent to 70% of one regional extreme poverty line (US$ 67 in 2010 dollars).

• The total cost of the grant has been re-estimated at US$ 27.1 billion, equivalent to 0.52% of regional GDP.

Source: Economic Commission for Latin America and the Caribbean (ECLAC). a Estimate based on a 9.1% drop in GDP in 2020 and considering a population living in poverty of 230.9 million in the same year.

The administrative costs required to make the transfers have not been taken into account.

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

The development strategy must be changed for an inclusive and sustainable recovery in Latin America and the Caribbean •

Universal access to health care: solidarity financing (independent of ability to pay), investment in infrastructure and human capacities.

•

New technology: efficiency and productivity in health-care systems (digital infrastructure, telemedicine, testing and tracing).

•

Address the economic and social determinants of health, reduce vulnerability through social protection and strengthen primary care. Scientific evidence is vital.

•

Health care as a public good and public health as the cornerstone of the health-care system with expansionary fiscal policies that guarantee sustainable financing in order to close gaps.

•

Strengthen and expand regional productive integration schemes in the pharmaceutical industry and for sanitary and medical supplies.

Tackle the crisis and implement a strategy to address the structural weaknesses of economies and societies Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean

Health and the economy: a convergence needed to address COVID-19 and retake the path of sustainable development in Latin America and the Caribbean Alicia Bรกrcena

Carissa Etienne

Executive Secretary Economic Commission for Latin America and the Caribbean (ECLAC)

Director Pan American Health Organization (PAHO)

30 July 2020