The pandemic covid-19 marked a before and after in the social structure of Latin America and the Caribbean.
According to a report from World Bank, The health and economic crisis caused a drastic contraction of the middle class, pushing millions of people back into vulnerability and poverty..
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According to the organization, 4.7 million Latin Americans stopped belonging to the middle class in 2020, an unprecedented decline in more than a decade. If the effect of the economic support programs implemented by Brazil during the emergency is excluded, The figure amounts to nearly 12 million people.
“The impact of the pandemic in Latin America has been devastating for low- and middle-income families. In a few months, the social advances achieved for more than 10 years were lost”, highlighted the World Bank.
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A structural setback
Before the health crisis, the region had shown a positive trend: from 2000 to 2018, the middle class went from representing 26% to 41% of the population. Sustained growth, the rise of formal employment and social programs promoted by various governments had allowed significant progress in economic inclusion.
However, the arrival of covid-19 slowed that progress. In 2020, the Latin American social structure was divided as follows: 37.3% of the population already belonged to the middle class; 38.5% were in vulnerable condition; and 21.8% lived in poverty.
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The report notes that in the absence of support measures such as direct transfers or food subsidies, at least 20 million additional people would have fallen below the poverty line.
“Emergency programs were a lifeline for millions, but their temporary nature leaves open the possibility of further deterioration if sustainable social protection policies are not consolidated“, warned the organization.
Middle class
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Causes of the collapse
The World Bank identifies three main factors behind the deterioration of the middle class:
– The high labor informalitywhich affects more than 55% of workers in Latin America. This group was the first to lose their income and the last to recover it, due to the absence of stable contracts, social security and access to credit.
– The structural inequality in basic servicessuch as education, health and digital connectivity. During the lockdowns, millions of students were left without access to virtual classes and many workers were unable to perform remote tasks.
– The weakness of tax and health systemswhich limited the capacity of States to respond with broad and sustained support policies over time.
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The report warns that even with the economic recovery, many families will remain trapped in a “vulnerability belt”, with no guarantees of returning to the middle class.
Middle class
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Differentiated effects by country
The magnitude of the impact varies between countries. In Brazil, direct transfer programs prevented a further increase in poverty. But in other large economies, such as Mexico, Colombia and Peruthe contraction of employment and the slow reactivation of sectors such as commerce, tourism and personal services hit average urban households hardest.
In ColombiaFor example, the Economic Commission for Latin America and the Caribbean (ECLAC) had already warned that the pandemic “reversed the social advances of more than a decade” and that the country increased its poverty levels to 39% in 2020, with more than three million new poor people.
“This clash was a reminder that economic progress does not necessarily imply social consolidation if structures remain fragile.”explained the World Bank.
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