How to create COVID-19 recovery in Latin America via sustainability efforts
11th June 2021
Authors: Maria Alejandra Gonzalez-Perez, Mahmoud Mohieldin, G. Tomas M. Hult, & Juan Velez-Ocampo
Traditionally, the Latin American and the Caribbean (LAC) region has exhibited diversities and complexities, but with shared elements throughout the LAC region. For instance, abundant examples exist of the region’s resilience and ability to resist, adapt to natural disasters, and overcome political, economic, and social crises.
The LAC region also has a long history of structural development challenges associated with institutional deficits, social inequalities, corruption, and financial debt. Recently, besides the coronavirus pandemic, the region has been affected by cumbersome challenges related to environmental degradation, climate change, and digital inequality. These structural problems provide a fragile platform to overcome the demands of the COVID-19 pandemic.
COVID-19 has represented a dreadful impact on the region. In addition to the tragic loss of more than 900,000 lives so far, there are endless effects via lost jobs, companies and family-owned businesses closing down, and a collapse in customer demand. Unfortunately, the impact of the COVID-19 crisis has had pronounced effects on the most vulnerable people and enterprises, which hinders a recovery to some level of normalcy. The drop in exports, falling commodity prices, disruption of global production and value chains, crash in demand for tourism, and lower demand for financial assets have affected the formal and informal economies and contributed to the strengthening of development difficulties and the creation of new development traps.
Some of the regional new development traps are related to the low productivity, incipient and deteriorating participation in nurturing global value creation, and the social vulnerability of a nascent middle class that is at risk of falling back to poverty. Already weak institutions cannot respond to citizens' demands. Additionally, environmental deterioration affected by the exploitation of natural resources and relaxed ecological regulations also explains the developing limits of the region.
Deep inequality, several social problems, and political polarization have reduced the ability of local and national governments to respond to COVID-19 demands effectively. For instance, despite the joint efforts to reduce the digital divide and increase broadband availability, internet access is available for less than 50% of households, hindering remote working opportunities, telemedicine, and online education.
Another societal problem is related to the democracy distress stemming from increased nationalism and populist political polarization. Meanwhile, governments’ necessity to accelerate reactivation and continuity of business, protect the most vulnerable citizens and strengthen health systems push them to increase debt. These metrics, in essence, project a strong potential for a new debt crisis.
Considering the intersection of several crises in LAC countries that the COVID-19 pandemic worsened, we argue that a way to emerge prosperous and viable is a function of accelerating the United Nations 2030 development agenda and its 17 sustainable development goals (SDGs). This all-encompassing framework led us to three Sustainable Development Goals (SDG) and accompanying imperative engines that can contribute to the recovery in the LAC region.
- Consolidating shorter impact-based regional value chains (SDGs 9, 12 and 17). This proposition implies the need (i) to develop more flexible, resilient, and shorter regional value chains, (ii) to reappraise participation in global value chains and find/develop new regional partners, and (iii) to create synergistic cooperation within the LAC region to develop new value chains.
- Attracting sustainability-themed Foreign Direct Investment (FDI) (SDGs 8, 10 and 11). This requires strengthening and adhering to sustainable investment policies and regulations, and aligning inward FDI to the region's objectives. It demands a commitment of multiple stakeholders towards the implementation of sustainable inward FDI policies and practices.
- Strengthening multilatinas and the LAC region’s private sector (SDGs 8, 9, 12 and 17). There is an opportunity to exploit multilatinas’ ability to operate under uncertain and turbulent conditions to urge regional economic recovery during and after COVID-19. An SDGs-based recovery could attain this by combining efforts of multiple stakeholders to support economic recovery based on sustainable practices.
Complete Reference: Gonzalez-Perez, Maria Alejandra; Mohieldin, Mahmoud, Hult, G. Tomas M.; & Velez-Ocampo, Juan (2021) COVID-19, sustainable development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based recovery. Management Research: Journal of the Iberoamerican Academy of Management. Doi: 10.1108/MRJIAM-12-2020-1119.
Read the published paper ‘COVID-19, sustainable development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based recovery’ by Maria Alejandra Gonzalez-Pere,; Mahmoud Mohieldin, G. Tomas M. Hult and Juan Velez-Ocampo, on which this blog post is based.