Multilaterals to play key role in 'new normal'

Multilaterals to play key role in 'new normal'

Economy & Policy Loans Uruguay Latin America Coronavirus

International financial institutions (IFIs) are playing a key role for Latin American countries to get through the COVID-19 pandemic and will be needed to help rebuild economies in what could be a longer-than-expected recovery, Uruguayan President Luis Lacalle Pou said on Wednesday.

“We have to shore up the IFIs,” he said as a keynote speaker at the 24th Annual CAF Conference, which is being held online this week.

Uruguay has said it would seek to borrow $2.5 billion from multilateral lenders to take on the coronavirus this year.

Lacalle Pou said it is not enough for multilateral development banks and other such lenders to make more capital available to countries, but they must also provide "a broader set of solutions" and "a bigger toolkit" to address different situations.

"This is because what is clear and what we all know is that we are going to have to live with uncertainty," he said. "We are going to have to live in a 'new normal.'"

The president did not provide details on how this could be done, but he did suggest that science will play a crucial role for countries to restart their economies. For example, he said that Uruguay is working with scientists to come up ways to reopen tourism this December to March summer, a key sector of the economy, while protecting lives.

"The pandemic is still developing," Lacalle Pou said of the continued spread of the virus in Latin America. "We cannot let down our guard."

Even so, he said there is a fine line between government-ordered quarantines and letting people take responsibility to help prevent the spread, such as wearing face masks and socially distancing themselves from others. If the lockdowns drag on for too long, it will sap economic activity and people's incomes, in particular day-wage earners, posing the risk of a rise in poverty and health problems, the president said.

"We have to strike a balance between individual freedoms, the need to continue to operate and taking care of our citizenry," he said.

Lacalle Pou, who took office March 1, only days before the spread of the virus was declared a pandemic, said people taking the lead on social distancing to prevent the spread of the virus has helped keep it down in Uruguay, more so than a mandatory quarantine would have.

Since the start of August, the number of confirmed cases has grown between 2.6% and 7.3% week-on-week in Uruguay, but in neighboring Argentina the case load has surged between 16.9% and 23.2% over the same period, according to data from the World Health Organization (WHO).

Uruguay's strategy is also helping its economy to get through the pandemic less scathed than others.

In a video conference organized by the Americas Society and Council of Americas (AS/COA) on August 27, Joyce Chang, managing director and chair of global research at JPMorgan, said that while Latin America's economy will shrink by 9% to 10% this year and not return to 2019 levels "until well into 2022," Uruguay will fare better than the rest of the region.

"The only country [in the region] where we see next year a rate of growth greater than the magnitude of the contraction is Uruguay," she said.