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WASHINGTON (July 22, 2020) -- The Latin American Committee on Macroeconomic and Financial Issues (CLAAF by its Spanish acronym) met virtually today to discuss ‘The COVID-19 Attack on Latin America: Proposals for an Effective Response.’ The CLAAF explored COVID-19's macro-level effect on the region, as well as detailed domestic and international responses, in a newly-released policy statement.
The CLAAF is a group of prominent economists and academics who have served as government ministers, central bank governors, and/or senior officials at multilateral institutions like the Inter-American Development Bank, International Monetary Fund and the World Bank. Twice a year, the group convenes to analyze major national or regional macroeconomic issues and then release a series of policy recommendations to change course and advance greater economic and financial stabilization.
The World Health Organization declared Latin America as the epicenter of the COVID-19 pandemic. And, as CLAAF stated in December 2019, Latin America has substantial structural vulnerabilities. “Protecting Latin America form the worst consequences of COVID-19 requires concerted effort,” the group states, and to protect against unprecedented shock to the Latin American economy from COVID-19, the CLAAF believes that, among other things:
Latin America requires the implementation of a massive policy response on the public health front, in formal as well as informal labor markets, and in income transfers to support basic consumption for an increasingly large number of families that are living day-to-day;
That the Covid-19 response will require, on average, a public sector effort equivalent to 10 percent of the region’s GDP
that international organizations must step up and play a significant role in the response to the pandemic;
that, subject to specific conditionality, the IMF should make available to the region resources in the range of USD 200-300 billion in order to finance a portion of the required response; and
that governments should consider establishing long-term loan and guarantee programs as well as recapitalization funds to minimize the bankruptcy of fundamentally viable firms.
That new legal instruments, such as corporate reorganization frameworks will be necessary to facilitate burden-sharing among private stakeholders (shareholders, creditors, management, labor)
“Our committee believes in a variety of detailed policy responses to defend against shock" said Liliana Rojas-Suarez, president of the CLAAF and director of the Latin American Initiative at the Center for Global Development. "The combination of well-designed governments’ interventions and the support of international financial institutions is essential to effectively deal with the threats of unduly large losses of jobs and firms bankruptcies in Latin America caused by COVID-19.”
CLAAF members participating in the July 2020 session:
Laura Alfaro, Warren Albert Professor, Harvard Business School; Former Minister of National Planning and Economic Policy, Costa Rica.
Guillermo Calvo, Professor, Columbia University; Former Chief Economist, Inter-American Development Bank.
Augusto De La Torre, Former Chief Economist for Latin America and the Caribbean, The World Bank; Former Governor, Central Bank of Ecuador.
José De Gregorio, Professor of Economics, University of Chile; Former Governor of the Central Bank of Chile.
Roque Fernandez, Economics Professor, UCEMA University; Former Minister of Finance, Argentina.
Pablo Guidotti, Professor of the Government School, University of Torcuato di Tella. Former Vice Minister of Economy, Argentina.
Paulo Leme, Executive in Residence Professor of Finance, University of Miami. Former CEO and Chairman of Goldman Sachs do Brasil Banco Multiplo S.A..
Enrique Mendoza, Presidential Professor of Economics and Director of the Penn Institute for Economic Research at the University of Pennsylvania.
Liliana Rojas-Suarez, President, CLAAF; Director of the Latin American Initiative and Senior Fellow, Center for Global Development; former Chief Economist for Latin America, Deutsche Bank.
Andrés Velasco, Dean of the School of Public Policy, London School of Economics, UK; Former Finance Minister of Chile.