Any visit to the southern region of the Western Hemisphere serves to confirm that Latin America has entered a phase of self-destruction similar to the one that generated waves of hyperinflation that wiped out its middle classes. The image is the same whether it is Buenos Aires, Lima, Caracas, Bogotá, Santiago or Mexico City. Beggars in the streets, windshield wipers at car stops, homeless people sleeping in squares and the sad look that denotes serious financial worries on all faces. Gone are the days of family walks through shopping malls and holding community fairs in public parks. In short, the entire region has already entered the worst of all worlds; inflation with economic recession.
And even though there have been many recessions that have occurred since the beginning of the 19th century when the separation from Spain began, this one has particularities that make it terrifying. This is a recession caused by an obvious break in supply chains and by the profound transformation that has taken place in the labor market. Replacing broken links in the supply chain can take several years. And as long as this happens, the recession and inflation will walk together. Another factor of enormous weight and consequences for the future has been the impact of COVID 19 on the world’s labor markets. In Europe, Japan and the United States, the fear of contagion and the sudden increase in liquidity experienced as a result of the stimulus plans caused what in the United States has been called: “the great resignation” Because 45% of employees in the service sector did not return to their usual work after the pandemic passed. Most of these people invested the incentives in creating their own businesses. Consequently, the service sector will have to raise salaries in order to attract staff and this will fuel inflation. And inflation in manufacturing-producing countries translates into a high cost of living for Latin American countries. In short, we are facing an inauspicious panorama in the economic field that seems to be prolonged. the services sector will have to raise salaries in order to attract staff and this will fuel inflation. And inflation in manufacturing-producing countries translates into a high cost of living for Latin American countries. In short, we are facing an inauspicious panorama in the economic field that seems to be prolonged. the services sector will have to raise salaries in order to attract staff and this will fuel inflation. And inflation in manufacturing-producing countries translates into a high cost of living for Latin American countries. In short, we are facing an inauspicious panorama in the economic field that seems to be prolonged.
This presents several dilemmas for the United States and for Latin American democratic forces. For the United States, 45% of its manufacturing exports go to Latin America. If this ratio falls, the US economic recovery will take longer and be more difficult. For Latin America, its weak democracies may succumb to an economic crisis that seems inescapable.
The feedback effects of the supply chain breakdown and rejection of work in the service sector could create a kind of perfect storm that seems to engulf the Americas in waves of political instability and economic weakening. This will perhaps resemble the post-independence years when economic depression and violence spawned authoritarian governments throughout the Latin American region while the United States fell prey to foreign debt and recession.
*Internationalist; Master in economic development, member of the Council on Foreign Relations of the United States
“The opinions published here are the sole responsibility of their author.”
