Caribbean Business Reports

Editor’s note: The following is a presentation from International Monetary Fund Managing Director Kristalina Georgieva who gave remarks on the Report on a Green and Resilient Recovery for Latin America to the Community of Latin American and Caribbean States (CELAC)

It is the right time to zero in on the topic we have today — resilience. Because we need to combine the exit from the health and economic crisis with building resilience to the climate crisis and the shocks it will bring.

Yesterday, the World Meteorological Organization announced that 2020 was one of the three warmest years on record. The warmest six years have all been since 2015.

Our planet is warming. And we should remember that a warmer climate increases the risk of pandemics in the future, as well as extreme weather shocks that can be detrimental to our economies and our people.

Health crisis triggers economic crisis

I want to recognise that the health crisis and the economic recession that it triggered are having a severe impact in Latin America and the Caribbean.

The countries in the region represent just eight per cent of the world population but, unfortunately, they account for 28 per cent of total fatalities. In 2020, real global gross domestic product (GDP) is expected to shrink by around four per cent and, in this region, real GDP is expected to shrink by about eight per cent.

What is particularly difficult are the job losses associated with the crisis. At the height of the crisis, Brazil, Chile, Colombia and Mexico had lost 30 million jobs. In the Caribbean, many countries have been affected even more severely because tourism — which has collapsed — is their main source of jobs and represents 50-90 per cent of GDP.

“We are already working with the World Bank and, in the region, we have started with policy assessments for Belize, St Lucia and Grenada”

And the report that is presented today shows that job losses are disproportionately hitting low-skilled workers, women and young people. In Colombia, almost twice as many women lost jobs as men.

So, we are wrestling with a very severe crisis. We will come out of it, but we will see significant job losses. And these job losses could be accelerated by digitalisation and automation.

So, governments will have to focus on creating skills and helping workers enter high-growth sectors. We will also need a great deal of focus on job-rich investments. Fortunately, when we talk about climate resilience, most of the investments we need are in this category — they are labour-intensive.

For example, resilient infrastructure, or reforestation, mangrove restoration or dealing with land degradation. These are all activities that can create jobs to help compensate for the impact of the pandemic.

So, this is a piece of good news. But it is combined with a piece of bad news.

Double whammy: pandemic and climate change

If we don’t like the pandemic, we are not going to like the climate crisis, one iota. Unfortunately, for countries in this region climate shocks may be even more severe.

I want to give one example. Dominica is being hit by the pandemic and GDP is declining by about 10 per cent in 2020. We expect GDP to recover once vaccination becomes widely available and tourism normalises. But compare that to Hurricane Maria that hit Dominica in 2017 — it led to a similar decline in output of around 10 per cent, but damages and losses accounted for 226 per cent of Dominica’s GDP that will take years to rebuild.

In other words, there is an urgent need to manage the post-COVID scarring and recovery in a way that helps us prevent future damages. This issue cannot be overstated.

Committed to recovery

At the IMF, we are determined to focus on helping countries understand and capture the economic and job-creation opportunities of building resilience and — when appropriate — help countries that lack fiscal space to take that action.

That brings me to the IMF’s commitments:

• First, we are committing to expand our work on Climate Change Policy Assessments. We are already working with the World Bank and, in the region, we have started with policy assessments for Belize, St Lucia and Grenada. Now, we will do more of these assessments so we can help identify more opportunities.

• Second, during the crisis we have been forward-leaning in the Latin America and Caribbean region, providing financial lifelines so countries can protect their people and their economies. We have approved some $52 billion in contingency support and $12 billion in emergency support, benefitting 21 countries in the region in total. Now, we are looking ahead to 2021 and beyond, and how we can use the financial strength of the IMF to help provide access to funding that will help countries for the transformation towards the digital economy and the new climate economy that is low-carbon and more resilient.
• Third, we are working on the policy packages that can help countries make the transition – both in terms of eliminating harmful subsidies and building incentives for the private sector to embrace this new growth path.

Let me conclude. After the global financial crisis of 2008/9, we did the right thing. As a world, we built a resilient banking system — because not having it had cost us a great deal. After this current crisis, we need to be much more ambitious in building resilience to the shocks to come. And among these are the climate shocks that are already hitting us.

So each of us has a duty. We take ours very seriously, and the region can count on the IMF to be on your side.