OECD calls for billions in funding to fight COVID-19 in LatAm
May 26, 2020 |
Health, education, infrastructure and tax deficits are undermining the region's response to the pandemic, secretary-general says
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Latin America requires greater physical, political and economic integration, backed by hundreds of billions of dollars in funding, to tackle structural weaknesses that are undermining its response to the coronavirus pandemic, OECD Secretary-General Ángel Gurría said on Friday.
"The Marshall Plan today would be worth around $130 billion in today's money, and Latin America requires not just one, but several," he said during a webinar hosted by the Inter-American Dialogue.
The Marshall Plan was a recovery program by the US government to help rebuild Western Europe after World War II.
Compared to more developed countries that have committed around $8 trilling to $9 trillion in mostly debt-financed funding to combat the virus, most Latin American nations are less equipped to respond and also face more severe consequences, according to Gurría.
With few exceptions, healthcare systems in Latin America are weaker and less resilient, governments have fewer resources to contain the spread of the virus and overcrowded and unsanitary living conditions for a large section of the population make social isolation virtually impossible, Gurría said.
"The coronavirus looks like it is already having a greater effect on developing and emerging countries," he said.
Before the crisis
Weak economic growth rates from before the coronavirus pandemic and high levels of household and corporate debt have also hindered the ability of several Latin American countries to respond to the crisis.
"The OECD has been denouncing the fact that trillions of dollars every year was being issued in non-financial corporate debt that was just one notch above the investment grade... and one systemic hit away from being downgraded," he said.
The secretary-general also noted that the rapid spread of the coronavirus across the region has exposed the lack of integration between Latin American countries, both in terms of physical infrastructure and policy coordination.
"There is a need for further integration in Latin America, there is a need to upgrade and update policies, there is a need to increase revenue streams and part of the revenue stream is to stop the evasion of tax payments," he said.
With the exception of a handful of countries, such as Argentina and Brazil, Gurría said most Latin American countries have tax-to-GDP ratios well below the OECD average, which has resulted in fewer resources spread more thinly and an increased dependence on more volatile revenue sources, according to Gurría.
"Latin America is getting hurt by the fall in commodity prices, the fall in oil prices, it is being hurt by the [drop in demand from] trading partners and it is also getting hit by [the fall in] remittances, so you are being hit from everywhere," he said.
'Building back better'
Latin America's response to the COVID-19 pandemic should not detract from broader efforts to promote regional integration, but go hand-in-hand with them instead, Gurría said.
The OECD has taken steps to help countries identity and punish tax evaders, introducing automatic information sharing between tax authorities in 139 countries covering around 50 million bank accounts worth some €5 trillion ($5.45 trillion), he said.
International standards for taxing digital companies are also being negotiated by OECD member states and are set to be revealed in October with the aim of being approved the following month at a summit in Saudi Arabia, he added.
"You don't need to have finished with the pandemic before you can start 'building back better' as the phrase goes," he said.
Latin American countries have also been exerting greater influence with the OECD itself. Costa Rica recently joined Chile, Mexico and Colombia as the fourth member nation from the region, and another three countries have applied.
Brazil is among the most vocal of the potential new members and it has lobbied hard for its inclusion, actively seeking to raise its profile among other members – efforts that could soon pay dividends.
"What the Brazil is doing is smart. They are not waiting for a decision, but they are joining more and more committees and more subcommittees and more working groups and advising on more instruments of the OECD. Brazil is now like family and it is in the kitchen," Gurría said.
Photo: OECD Secretary-General Ángel Gurría speaks during a webinar hosted by the Inter-American Dialogue on May 22. (Screenshot, Joe Rowley)