2.7 million companies estimated to go under in Latin America and Caribbean due to the coronavirus pandemic
The most severe impact of the pandemic in the region is estimated at the closure of 2.7 million companies in the next six months, most of which are micro-businesses with the loss of 8.5 million formal jobs that could go into informality, he warned. this Thursday the Economic Commission for Latin America and the Caribbean (ECLAC, cepal.org).
In the presentation of her fourth special report Covid-19, called "Companies facing Covid-19: emergency and reactivation", Alicia Barcena, executive secretary of the organization said in a virtual press conference that the vast majority of companies in the region They have registered significant falls in their income and have difficulties in maintaining their activities.
Among the main challenges are serious problems in meeting their salary and financial obligations, and difficulties in accessing financing for working capital.
In Panama, the sectors that registered the greatest falls in income are hotels (-99.4%), construction (-86.4%), restaurants (-85.0%), retail trade (-83 , 8%) and tourist services (-78.7%), according to the ECLAC report based on data from the Chamber of Commerce, Industries and Agriculture of Panama. Official reports indicate that more than 260,000 labor contracts have been suspended.
Although the crisis affects all companies, the impact will be much greater in micro-enterprises and SMEs, due to their weight in the business structure of the region, with which this will translate into major closings and job losses.
ECLAC recognizes that an immediate objective of the governments of the region has been to seek mechanisms to reduce the destruction of jobs and the closure of companies caused in the critical phase of the pandemic.
Among the recommendations is to facilitate liquidity and access to credit. Of the total recommended measures, direct help with the transfer of funds and cancellation of obligations is also suggested. In 18 countries of the region, measures have been established for the protection of employment, avoiding dismissals through wage subsidies and employer contributions, among others.
In most countries, the amounts of the credit measures announced to the business sector are less than 4% of gross domestic product (GDP). In the case of Panama, the amount of credits announced represents 2.1% of GDP. Below Costa Rica, which has allocated 4.3% of GDP.
Regarding the opening of the economy, Barcena insisted that it should be ordered and in the meantime the availability of credit should be maintained, supporting the self-employed and strategic companies such as tourism that are important in many economies in the region.
For now the pandemic in Latin America has not been controlled and according to ECLAC it is difficult to determine when the recovery will take place, but it could be at the end of this year or the beginning of 2021.
Estimates of economic growth in each country will be released by ECLAC next week.