In new economic analysis, researchers find that COVID-19 will significantly increase poverty in Latin America’s four biggest countries.
WASHINGTON, DC – With some Latin American countries leading the world in COVID-19 infections and deaths, the economic shock of the pandemic on the region will increase household poverty levels more than previously thought, new research from authors at Tulane University’s Commitment to Equity Institute and the Center for Global Development has found.
The new paper, titled “The Impact of COVID-19 Lockdowns and Expanded Social Assistance on Inequality, Poverty and Mobility in Argentina, Brazil, Colombia and Mexico,” uses household surveys to simulate the distributional consequences of COVID-19-induced lockdown policies in the four largest countries in Latin America. These estimates are worse than other studies’ because this paper does not assume that all individuals lose the same in proportional terms, i.e. that the income distribution remains the same after COVID-19.
To contain the spread of COVID-19, governments implemented lockdown policies that inevitably led to reduced activity, falling employment and income, and rising poverty and inequality. Specifically, the researchers found that:
At least 25 million people could become poor in Argentina, Brazil, Colombia, and Mexico as a result of COVID-19 and the associated economic shock.
The worst effects may not be on the poorest, but on the moderate poor and those vulnerable to total income losses across the income distribution.
Even if poorer households lose less in relative terms, the losses may be catastrophic.
“Distribution of income is changing, and fast, in Latin America during the pandemic,” co-author Nora Lustig, a non-resident fellow at CGD and founding Director of the Commitment to Equity Institute (CEQ) at Tulane University, says. “Even expanded social assistance cannot prevent millions of people in Latin America newly falling into poverty.”
“The depth and duration of the crisis could change these numbers more,” said co-author Stephen Younger, also of the CEQ. “Still, it’s important to understand the scope of the real-life implications of the economic downturn, from the moderately to extremely poor.”