Central America and the Pandemic: Different Priorities and Risky Bets

By Alexander Segovia*

Presidents of Central America participate on a SICA virtual meeting

Reunión Extraordinaria de Presidentes del Sistema de la Integración Centroamericana (SICA)/Flickr/Creative Commons

In most Central American countries, the social dimension of the COVID‑19 emergency has competed with economic priorities, and in some it hasn’t even been a top priority. Governments have responded independently of one another, showing little regional coordination aside from a $1.9 billion Regional Contingency Plan approved by the Sistema de la Integración Centroamericana (SICA) and funded by the Central American Bank for Economic Integration (BCIE), to support national-level efforts.

El Salvador has designed a response strategy that prioritizes the health dimension of the crisis, not the need for economic recovery. The rigorous implementation of stay-at-home and social isolation measures has caused a number of problems, including essentially shutting down the economy, with enormous political costs. The Legislative Assembly authorized the government to issue coupons worth $3 billion to help families get by, causing a significant increase in the country’s external debt and fiscal deficit.

  • The Salvadoran response has been well-received by the population so far, but this could change quickly in the face of the high economic and social pain it has caused. Moreover, the authoritarian and militarist way the confinement regulations have been enforced, and the government’s lack of respect for the Constitution and the separation of powers, have also troubled many.

Nicaragua is the opposite case of El Salvador. The government has refused to adopt social isolation measures and has encouraged people to take to the streets and participate in large events. The Ortega Administration’s concern is about the economy, which has been in a deep crisis since the social protests in 2018 and the government’s repressive reaction to them. This priority partly explains the government’s resistance to implementing shelter-in-place and social-distancing regulations.

  • The government is playing with fire. If the health crisis spins out of control, it will cause both a great loss of human lives and a profound socio-economic crisis – which sooner rather than later will spark a social and political crisis of massive proportions.

Costa Rica, with its good universal health care system and the region’s most developed state infrastructure, is best prepared. Its initial response to the health emergency was slow and permissive, reflecting a government decision to confront the crisis in a manner that causes the least damage possible to the economy. It has since acted more decisively and has suffered only 10 deaths from COVID‑19.

  • Costa Rica is the only country in the region trying to finance the additional costs by reducing non-priority public expenditures and by introducing a temporary solidarity tax on capital gains and on the salaries of higher-paid managers in government and the private sector, who have economic security and safe jobs.

Guatemala is implementing a response in which the health emergency is competing with leaders’ desire for economic recovery. This reflects the enormous influence over the government and Congress enjoyed by the economic elites, who hold sway over public policies and have a veto over any that affect their interests.

  • By putting the social and economic challenges on an equal plane, the elites have demonstrated, in what they see as a politically correct way, their ability to equate human life with the accumulation of capital.

Honduras has implemented a strategy that gives insufficient attention to the health crisis by assigning higher priority to containing the economic impact. Its response has been fragmented and confusing; it combines emergency measures with economic recovery actions that will take effect only in the second half of the year. In addition, policymaking processes have been opaque, and there are no guarantees that public funds will be used transparently.

  • Concerns that the crisis has also given rise to greater militarization of the country and an increase in human rights violations by security forces are also mounting.

The best way for Central America to confront the COVID emergency is through energetic responses focused on containing the health crisis – with effective stay-at-home and social-distancing measures – and strengthening of social protection systems and programs, including direct financial payments to households. These policies should be backed up with broad political and social agreements and sustained with absolute respect for democracy and human rights.

  • Preliminary evidence indicates that, while addressing the health crisis has high costs in the short term, delaying that investment increases the number of deaths and leads to a deeper and longer economic crisis. Central American governments and economic elites have a clear choice: pay a smaller price now combatting the virus, or pursue short-term benefits and pay a much higher price in the long run.

* Alexander Segovia is a Salvadoran economist. This blog article is based on and updated from an analysis originally published here by Análisis Carolina in Madrid.

Ecuador: Growing Political and Economic Repercussions of COVID-19

By John Polga-Hecimovich*

Lenín Moreno speaking at an event

Lenín Moreno, presidente de Ecuador/Flickr/Creative Commons

Despite early aggressive measures against COVID‑19, Ecuador has suffered one of the world’s most devastating outbreaks that, combined with the drop in international oil prices, may be catastrophic for the country’s economy and for President Lenín Moreno. Since March 16, the President declared a national state of emergency and curfew throughout the country; imposed strict social isolation (until May 4) that suspended all face-to-face activities; and established a special security zone in the province of Guayas, epicenter of the pandemic. Even so, Ecuador currently has the second-highest number of documented cases in South America, after Brazil, and the death toll from COVID‑19 may have reached between 7,600 and 11,000 during April.

  • Ecuador’s first case of COVID-19 was detected on February 27 in the port city of Guayaquil. As the virus spread in March and early April, the city experienced an unprecedented humanitarian crisis due to the much-publicized accumulation of hundreds of corpses in homes and on the streets. The local government’s response was erratic, with mayor Cynthia Viteri at one point ordering officials to block the runway at the airport to prevent a flight from Spain from landing, and later comparing the devastation to “the Hiroshima bomb.” Viteri has since estimated that perhaps as many as one-third of guayaquileños have COVID‑19.

Despite the lockdown measures, the national government has also shown a lack of capacity in addressing the public health crisis. Moreno created a task force to deal with the situation in Guayaquil, but even then, the government possessed a limited ability to determine who had the virus, to say nothing of addressing shortages of suits, masks, gloves, and ventilators for hospital personnel. In a national address in early April, the President acknowledged that official coronavirus figures had significantly understated the extent of the country’s health emergency. There have also been worrying accusations of corruption against officials in the Ecuadorian Institute of Social Security (IESS) in outfitting hospitals, and the Attorney General’s office charged the now ex-National Secretary of Risk Management Alexandra Ocles with influence-peddling.

  • The combined impact of the pandemic and oil crisis on the country’s economy may be catastrophic. Petroleum is Ecuador’s largest export commodity and accounts for about a third of its public-sector revenue. The 2020 national budget was planned with an oil price of $51.30 per barrel (currently hovering around $30.00), which will increase the country’s deficit. Ecuador also has little savings to implement a countercyclical fiscal policy and is on the brink of defaulting on its $50 billion debt. Adding to the troubles, due to dollarization, it cannot devalue its currency to reduce its deficit. The collapse of export revenues and massive foreign debt payments have greatly compounded the economic cost of the pandemic, and the country’s GDP may shrink by as much as 7-8 percentage points.
  • The government is just barely muddling through. Private bondholders have accepted the government’s request to defer interest payments on the country’s debt until August 15, freeing up $811 million and buying Moreno some breathing room. However, this could merely postpone a default: a fragmented and intransigent legislature and social sectors have balked at emergency austerity measures. Responding to the country’s social needs and economic well-being is a difficult line to walk. The government has issued a $60 stimulus (bono) that will benefit some 400,000 people, while at the same time it submitted a bill to the National Assembly that proposes an extraordinary tax on both companies and individuals to bring unbudgeted resources into the national treasury.

While the government confronts its public health and economic problems, general elections are nine months away and the National Electoral Council is already debating ways to carry them out. There is too much uncertainty at the moment to determine any potential frontrunner. Moreno is not running for re-election; ex-Guayaquil Mayor Jaime Nebot has suffered due to his city’s lack of preparedness at confronting the pandemic; and the fate of Interior Minister María Paula Romo may rest on the Moreno government’s (so far unconvincing) response. Like leaders around the globe, Moreno is faced with the unpleasant challenge of keeping the country’s economy shuttered longer or risking a resurgence of the virus. The success or failure of his strategy will undoubtedly shape the country’s political and economic future.

May 15, 2020

* John Polga-Hecimovich is an Assistant Professor of Political Science at the U.S. Naval Academy. The views expressed in this article are solely those of the author and do not represent the views of or endorsement by the Naval Academy, the Department of the Navy, the Department of Defense, or the U.S. government.

The Other Pandemic

By Alan M. Kraut*

Donald Trump speaking to supporters

Donald Trump speaking to supporters at an immigration policy speech at the Phoenix Convention Center in Phoenix, Arizona. / Flickr / Creative Commons License

The coronavirus has sparked a virulent wave of racism and intolerance in the United States – as seen in past pandemics – but strong leadership can blunt or even stop it. The current wave echoes a contemporary ethnocentric nationalism that has infected many societies and political leaders around the world.

  • U.S. President Donald Trump denounced the anti-Asian prejudices – including epithets and, at times, spit and punishing blows against Chinese-Americans – that were stirred by his own use of the terms “foreign virus” and “Chinese virus,” but the damage was done. A community was put on notice, “You are the ‘other’ and you endanger us all by your presence.”

Throughout human history, groups defined by race or religion have been persecuted because of their association with disease. The Black Death of the Middle Ages was blamed on Jews, triggering ferocious physical persecution that resulted in tens of thousands of deaths, often by torture. Sociologist Erving Goffman observed that the most essential version of stigma was the abomination of the body – because the disease-causing contagion cannot be detected with the naked eye or easily avoided.

  • Throughout American history, epidemics have often been blamed on a specific immigrant or ethnic group and triggered anti-migrant policies. A cholera epidemic in 1832 was blamed on Irish Catholic newcomers who were poor and lived in congested conditions. The anti-Catholic passions of Protestant evangelicals were a factor.
  • Before the Quarantine Act of 1878 quarantine powers shifted from the states to the federal government. Each state had its own laws and immigration depots, such as Castle Garden in New York, which opened in 1855. Later, at federal depots, physicians used increasingly sophisticated medical instrumentation and diagnostic techniques to admit the healthy and those sufficiently robust to support themselves, but their expertise did not curb xenophobic hysteria or the association of immigrant groups and their behaviors with specific diseases. Chinese laborers were blamed for bubonic plague in the San Francisco area in the 1880s, and Italians were blamed for a polio epidemic that swept through the east coast of the United States in 1916. Anti-Semitic xenophobes dubbed tuberculosis the “Tailor’s Disease” or the “Jewish Disease” despite the lower rates of the disease in Jewish communities than in many non-Jewish communities in the United States.

Xenophobia and racism have not always surged in the United States during pandemics – thanks to greater public awareness of immigrants’ contributions and to strong political leadership.

  • There were fewer incidents of xenophobia during the 1918 influenza pandemic because immigration declined dramatically (from 1,218,480 a year in 1914 to 110,618 in 1918), and critics found it awkward to blame newcomers because over half a million foreign-born soldiers of 46 different nationalities were serving in the U.S. military.
  • Many Presidents of both parties since then have not hesitated to encourage Americans to call upon the better angels of their nature with respect to the foreign-born. Sitting in the shadow of the Statue of Liberty, Democratic President Lyndon Johnson signed an immigration act in 1965 that abandoned the most restrictive immigration policy in American history and replaced it with a more welcoming policy. Years later, former Republican President George W. Bush echoed those sentiments, noting that “America’s immigrant history made us who we are.”
  • Xenophobia during an epidemic may be a “social ritual” that reaffirms a hypernationalism in the native-born, but when the drama concludes and the curtain descends, the prejudice and acts of discrimination can either transfer to a different stage or leaders can lead us away from them.

Little such leadership has come from the current occupants of the White House. Presidential advisor Stephen Miller and his allies claim that stopping new arrivals crossing the country’s southern border is necessary to preserve public health from illnesses borne by migrants. In 2018, the surge of migrants toward the border led to inquiries that Miller hoped would reveal – but did not – the spread of highly contagious diseases that endangered residents of states where they settled. More recently, Miller has encouraged the President to use his public health powers to seal the borders. One such federal law, the Public Health Service Act of 1944, allows the Surgeon General and the President to exclude from the U.S. individuals who might pose a danger because they could bring in “communicable diseases.” Ironically, while it has been Miller’s intention to target Latinos, many of them are doing the “essential work” that has kept the nation going during the crisis – in meat processing plants, grocery stores, and hospitals, where they are involved directly in the care of Covid-19 patients. Many thousands of those providing patient care are Latino “Dreamers” protected by the Deferred Action for Childhood Arrivals (DACA) program that the White House wants to end.

May 12, 2020

* Alan M. Kraut teaches history at American University.

Brazil: Presidential Lockdown?

By João Jarochinski Silva*

Bolsonaro Questioned

Bolsonaro addresses the press, May 2019/Palácio do Planalto/ Flickr/ Creative Commons License

Brazilian President Jair Bolsonaro faces mounting crises that could cut short his term in office and prolong Brazil’s multi-year political turmoil. The departure last month of two of his most widely respected cabinet members – Health Minister Luiz Henrique Mandetta and Justice Minister Sérgio Moro – came on the heels of other bad news as Bolsonaro completed his 16th month in office.

  • Brazil’s GDP grew only 1.1 percent in 2019 despite the government’s promise that pension reform and other measures would make it almost double that. Most of the growth, moreover, came from the informal sector, not the entrepreneurial class that was expected to back Bolsonaro. Moreover, all predictions are that economic performance will decline significantly because of COVID-19.
  • A number of disputes have significantly eroded his political base. In his first year as president, he left the Liberal Social Party (PSL), which gave him a home and crucial help in his campaign and early days of government. Since November, he has been trying to create a new party, Aliança pelo Brasil, but it is unlikely that he will have it ready to participate in this year’s municipal elections (Brazil has 5,000 municipalities) or able to attract politicians, mainly deputies and senators, to form a consistent base in Congress. These likely failings will affect the party budget and its TV time in the national elections of 2022. Social media was central to Bolsonaro’s successful formula last year, but observers wonder if the magic will remain.

In this context, his decision to fire Mandetta and Moro’s decision to resign are particularly severe blows.

  • Bolsonaro and Mandetta had clashed over how to deal with the COVID‑19 crisis. Bolsonaro wanted to reopen some sectors of the economy, but the minister – with apparently strong public support – sought to follow the international protocols established for “flattening the curve” to protect the health system from collapse.
  • Moro disagreed with the President’s decision to fire the commander of the Federal Police when investigations appeared to be closing in on some activities of his sons. As lead ex-judge of the Lava Jato investigations, when Moro joined the administration, he brought credibility among some sectors to the Bolsonaro government’s stated commitment to anti-corruption. Moro’s speech on leaving the ministry suggested that he felt betrayed.

Bolsonaro’s strategy at this point appears to focus on reaching out to two constituencies that he considers reliable: Evangelical Christians and the military.

  • Two of his sons, while managing to keep their government positions, shifted to the Partido Republicano, which has strong links with the Universal Church of the Kingdom of God and the second most-watched TV channel in Brazil, and other Evangelical groups. These groups are historically linked with the Centrão, a group of parties that do not have long-term political allegiances but support anyone who promotes their most immediate interests on issues such as federal administration and control over some areas with great budgetary power in the government.
  • Bolsonaro has also given the military a central political role in his government. Several government posts are held by retired and active-duty military officers, some of whom, like Moro, brought good levels of public approval to the administration. Some were seen as agents capable of taming Bolsonaro’s impulsiveness, even if evidence of success has been lacking. By lashing himself to military officers, however, Bolsonaro has tied the armed forces to his own fate and essentially coopted the officer corps into supporting him. In the event of an impeachment or other trauma, Vice President Hamilton Mourão, a retired general, and others would be held responsible for the government’s failure.

At this point, there is no good scenario for the Bolsonaro government – and COVID and other factors raise the specter of very bad scenarios in which courting the Centrão will be costly politically and financially. His alliances with the Centrão and the military also put at risk what little credibility he may have had remaining on anti-corruption after Moro’s defection. The military may not always want to be the guarantors of the government for public opinion.

  • The military will assume a technical role in dealing with the consequences of the coronavirus, including managing the impact of the economic decline such as a worsening of social tensions, but the results in terms of governance are unpredictable.
  • As Bolsonaro gropes for a way ahead, Vice President Mourão seems unlikely to willfully trip him up. Despite investing in a more thoughtful and responsible image than the president, he has not projected himself as an alternative. But the pressures for impeachment could mount steadily. Former Justice Minister Moro will be an important factor in any future scenario, but he will have to face angry supporters of Bolsonaro, mainly on social networks. A deep sense in the ranks of the other parties that he had a political agenda and lacked impartiality in the trials related to former President Lula by the Brazilian Supreme Court promises to continue the fireworks.

May 5, 2020

* João Jarochinski Silva is a CLALS fellow and professor at the Universidade Federal de Roraima (UFRR).

Regionalism in the Time of Coronavirus: The Only Way Forward?

By Leslie Elliott Armijo*

Coronavirus Latin America

Map of the COVID-19 outbreak in Latin America as of 30 April 2020/ Pharexia/ Wikimedia Commons (modified)

To overcome the multiple challenges of the COVID‑19 crisis, Latin America’s leaders will need to build regional cooperation around pragmatic solutions – an elusive goal for countries with a legacy of disunity and weak collaboration. The coronavirus has hit at a moment of economic vulnerability. Regional growth averaged only 1.9 percent in 2010-19, worse than in the “lost decade” of the debt-crisis 1980s (2.2 percent). Labor productivity, which in 1960 was almost 250 percent of the world average, has fallen steadily in every subsequent decade, and in 2019 sat at a mere 90 percent of the global mean. Persistent squabbling among Latin countries has meant that major global trading states, including the United States and more recently China, could dictate the terms of bilateral trade and investment agreements in ways that favored these larger powers.

  • In negotiating global trade, Latin America and the Caribbean have shown little shared identity or cohesion, whether as a region or as sub-regions. As of late 2018, as global value chains coalesced around three regional hubs – China/East Asia, U.S./North America, and Germany/European Union – Mexico, Central America, and the Caribbean were linked to the U.S. but lacked bargaining power to seize more advantageous positions vis-à-vis the United States. South America has deindustrialized since the turn of the century, returning to its historic role of commodity exporter to all three hubs. Intra-regional trade as of 2017 was only 22 percent of all Latin American trade and had fallen since 2013.
  • This is a shaky foundation from which to face the health and economic challenges of COVID‑19. The IMF’s scenario, which assumes an optimistic return to business mostly-as-usual in the third quarter, predicts a contraction of GDP in 2020 of 5.2 percent in the region, driven by brutal collapses in the two largest economies, Brazil and Mexico, of -5.5 and -6.6 percent respectively. The extra-regional markets for Latin America’s exports certainly will shrink due to both short-term reasons of global depression and longer-term ones of enhanced economic nationalism abroad. Remittances and tourists from the U.S. and elsewhere will not return to their previous numbers for a long time.

A coronavirus-solidarity virtual summit last month showed that some regional leaders realize the need for joint action. Nine of 12 South American presidents participated, although Brazilian President Jair Bolsonaro – who has made intemperate and dismissive remarks about his fellow leaders – gave his seat at the video conference to his foreign minister, Ernesto Araújo.

  • Argentine President Alberto Fernández participated despite Bolsonaro’s snub (including on previous occasions) and his previously chilly relations with the sponsoring body, PROSUR, founded in 2019 by center-right Presidents Iván Duque of Colombia and Sebastián Piñera of Chile as an explicit counter to the pre-existing regional body, UNASUR, which leaned left during the presidency of Bolivia’s Evo Morales (now in exile in Argentina). In so doing, Fernández demonstrated the pragmatism and understanding that Latin American and Caribbean leaders often eschew: if you want to solve policy challenges, you must maintain dialogue with people with whom you disagree.

If there is any light at the end of this tunnel, it could be psychological, as crises tend to focus minds. The disruption in international relations beyond Latin America probably will accelerate the move away from the post-Cold War “unipolar moment” and fuel domestic economic nationalism that will shake up the three major global trading hubs – a reorganization in which the region could redefine its place. In this scenario the best defense for Latin America is a strong offense. As Alicia Bárcena, Executive Secretary of the UN’s Economic Commission on Latin America and the Caribbean (CEPAL), said recently, the region’s resilience likely depends on “investment in strengthening regional production chains” to create “complementarities in production structures and regional integration.”

  • Diplomacy enables states to share knowledge and engage in collective action to meet real cross-border challenges, including those of the current crisis. Regional solidarity does not require headquarters buildings, formal treaties, and summit pageantry, nor even similar domestic political systems. The considerable achievements of the loose, informal clubs known as the G7, the G20, and the BRICS prove the value of cooperative models that need not boast costly institutional scaffolding. The Association of Southeast Asian Nations (ASEAN), formed in 1967 by 10 countries that were at least as mutually suspicious of one another as they were of China, provides another lesson about somewhat effective regional cooperation that Latin America would do well to note.

April 30, 2020

* Leslie Elliott Armijo is an associate professor at the School for International Studies, Simon Fraser University, Vancouver. Her most recent book, coauthored with C. Roberts and S.A. Katada, is The BRICS and Collective Financial Statecraft (Oxford University Press, 2018).

Argentina: Yet Another Generalized Default?

By Arturo C. Porzecanski*

Argentine Vice President Cristina Fernández de Kirchner and Argentine President Alberto Fernández during a working meeting with governors last week/ Casa Rosada/ Creative Commons

The Argentine government’s current attempt to force investors to accept a punishing debt-restructuring plan puts the country at risk of yet another sovereign default on foreign-law, foreign-currency debt. The attempt validates the massive loss of confidence that took place last August, when local and foreign investors ran for the exits in the wake of the unexpectedly strong performance of the Alberto Fernández-Cristina Fernández de Kirchner ticket in the country’s presidential primaries.

  • Confidence had already been set back in early 2018, after a series of disappointments with how then-President Mauricio Macri was running overly loose fiscal and monetary policies that encouraged excess government borrowing and facilitated capital flight. Macri’s decision to turn to the IMF for a huge bail-out loan in exchange for a modest fiscal and monetary belt-tightening shored up confidence, but the prospect of Peronism’s return to high office undermined investor confidence anew, causing a steep plunge in Argentina’s stocks, bonds, and the currency from which it has not recovered.

Fernández had a window of opportunity to provide confidence to local and foreign investors – following the example set by Brazil’s Lula da Silva back in mid-2002, when his pulling ahead in presidential polls sparked the beginning of a market rout in that country. However, all that Fernández has done is blame Macri for all that was going wrong, denying that mistrust of Peronism was also a factor in deepening the financial and economic crisis.

  • Absent any reassurance, investors have been reluctant to show up at auctions of new peso- and dollar-denominated treasury bills, preferring to cash out of positions whenever those obligations matured. Therefore, even before Fernández took charge in December, Macri was forced on one occasion to unilaterally postpone repayments of treasury bills falling due.
  • Fernández has institutionalized the practice of deferring by decree the majority of payments coming due each month, thus defaulting time and again on most peso and dollar obligations subject to Argentine law and jurisdiction. Until very recently, however, he and the Governor of the Province of Buenos Aires, Axel Kicillof, were honoring their obligations contracted under New York law and jurisdiction.

The coronavirus disrupted a less investor-unfriendly alternative devised by Fernández to avoid a repeat of the massive default, financial isolation, and bruising legal defeats (in New York courts) that his predecessors had suffered during 2002-2015. The idea was for federal and provincial governments to develop debt-restructuring proposals and present them to bondholders by mid-March, in order to obtain by mid-April creditor approval of a deferral of payments coming due during 2020-23.

  • To cushion the blow of the pandemic, the debt-restructuring plan, delayed to mid-April, included terms and conditions that were substantially worse for bondholders. Investors holding $66 billion of bonds are being asked to write off some principal and most interest payments throughout the decades-long life of new bonds to be issued in exchange for existing ones, in a proposal that would impose (net present-value) losses on bondholders averaging at least 60 percent. The Province of Buenos Aires has presented a similarly aggressive debt-restructuring plan.

A critical mass of investors has spoken out against the government’s proposal, including outright rejections by three groups of bondholders who could block any deals. To ratchet up the pressure, the federal government skipped a $503 million payment due on April 22, setting the clock running on what could easily turn into Argentina’s ninth sovereign default on foreign-law, foreign-currency debt.

  • One constructive way for Argentina to break the impasse with its private creditors would be to ask fewer concessions from them by deciding to seek new financing from, or else a rescheduling of debt service due to, the IMF. This would be achieved by requesting support under a longer-term Extended Fund Facility. Because Argentina’s program with the Fund was a short-term standby facility, under which $44 billion were disbursed, the whole amount plus interest is to be paid back in full between now and 2024. These scheduled payments to the IMF amount to more than 40 percent of total foreign-currency payments the government of Argentina is supposed to make during 2020-24.
  • If the Fernández administration were willing to work with the IMF on an economic program that would impose fiscal and monetary discipline to kick in once the coronavirus pandemic is over, the government would not need such large concessions from its private investors. In fact, such a partnership with the Fund would pave the way for a gradual return of investor confidence and the reopening of its domestic bond market for renewed financing on a voluntary basis.

April 28, 2020

*Dr. Arturo C. Porzecanski is a Distinguished Economist in Residence at American University and a member of the faculty of the International Economic Relations Program at its School of International Service.

COVID-19 in the Caribbean: So Open, so Vulnerable

By Bert Hoffmann*

rows of empty beach chairs in Jamaica

Beach in Jamaica/ Marc Veraart/ Flickr/ Creative Commons License (not modified)

In the Caribbean, the COVID-19 crisis hits some of the world’s most open, specialized economies, forcing the region to rethink its development model. Eleven of the world’s 20 most tourism-dependent nations are in the Caribbean. The collapse of this sector leaves the import-dependent island states extremely vulnerable beyond the immediate health crisis and beyond the social and economic fallout from the current “shelter in place” rules and lock-down measures.

  • For most Caribbean nations, tourism is by far the most important economic activity. In small states like Barbados, St. Lucia, Antigua and Barbuda, and the Bahamas, tourism makes up more than 40 percent of GDP. In bigger countries like Jamaica, it accounts for more than half of exports and employs almost a third of the workforce. Many in the tourism industry cling to hopes of a speedy recovery, but this is not likely. Travelers’ confidence in cruise ships and exotic flight destinations will not fully rebound before vaccinations against the virus become readily available. Not only the low season this summer is lost, but also much of the crucial winter season.
  • The pandemic is also going to slash remittances from Caribbean emigrants. Most states have sizeable diaspora communities, and money transfers from abroad are a vital part of their economies. Unlike in the aftermath of hurricanes, migrants in the United States, Europe, or neighboring islands are affected by the same crisis. Many will also cancel visits “home.”

Current social policy measures may be able to mitigate some of the hardship, but foreign exchange buffers are hardly sufficient to maintain these on such a scale over a long time. Largely agricultural countries decades ago, most of the region today imports more than half the food they consume – seven CARICOM countries even more than 80 percent. With global supply chains and food production in the United States disrupted, imported food prices will rise. Reviving local farm tradition passes from a “romantic” niche concern to being a key issue of social policy.

  • In the Caribbean’s non-sovereign territories, the crisis underscores their population’s dependence on the welfare systems of the United States, France, the UK, and the Netherlands. At the same time, it casts a spotlight on persisting inequalities. Puerto Rico, for instance, has only one-fourth of intensive care unit beds per capita than the U.S. mainland, despite its much higher share of elderly residents.

The coronavirus crisis is bringing to the fore a number of long-term challenges for the Caribbean. If left solely to the logic of comparative advantages, the region’s world market integration tends to be one of specialization, not diversification. The downside is a high vulnerability to external shocks. In recent years, “resilience” became part of the vocabulary of Caribbean policymakers in the context of climate change, not to face global economic or health shocks. The current crisis demands thinking of “resilience” as a development goal in an even broader sense.

  • The pandemic also highlights the extent to which the Trump Administration takes the United States out of the game of soft policy approaches, and China finds a field left wide open. Beijing’s shipments of medical supplies and protective wear are a small investment, but they have a big impact in countries of some 100,000 inhabitants. Taiwan is also providing face masks and soft loans to those that still recognize it diplomatically. In contrast, what Washington seems to care about more than anything else is that the Caribbean nations should not accept Cuban doctors in to fight the disease.

April 20, 2020

* Bert Hoffmann is a Lead Researcher at the German Institute for Global and Area Studies (GIGA) and professor of political science at the Free University of Berlin’s Latin American Institute.

Cuba: Dealing with the Global Pandemic

By Ricardo Torres*

Cuban nurses carrying the Cuban flag

COVID-19 Response: Over 100 Cuban Nurses Arrive Barbados / Flickr / Public Domain

Cuba faces a “perfect storm” – a global health crisis – that poses the latest in a long list of challenges to its government, but a systematic destabilization of the country is highly unlikely, if not remote, for now. The COVID‑19 pandemic has caused an unprecedented disruption to the world economy, the devastating effects of which no country has escaped. The Cuban economy is critically dependent on tourism and remittances, two areas that have been deeply affected. Those countries from which visitors and cash flow to Cuba are greatest – the United States, Canada, Western Europe, and China – have been hit hard.

  • The shock is compounded by a drop in Cuba’s average annual growth from 2.7 percent in 2010‑15 to 1.4 percent in 2016‑19. The causes of that decline include the economic crisis in Venezuela; the cancellation of medical services agreements in Bolivia, Brazil, and Ecuador; the end of the international tourism bonanza; and the effect of new U.S. sanctions. Washington’s actions have complicated trade, foreign investment, and travel. The measures have limited remittances, reduced Cuba’s ability to import fuel, and clamped down on foreign firms operating in Cuba, such as through the first application of Title III of the “Helms-Burton Act.”
  • Another factor has been the disappointing results of Cuba’s internal economic reform, which has been wrapped up in political contradictions and a lack of clarity of its objectives. One costly flaw in these circumstances has been the government’s inability to stimulate industries that provide essential products, particularly food. Combined with the international challenges, including fresh, tough sanctions by the United States, this problem has contributed to a situation in which the Cuban people face growing shortages of all kinds of products, including food, medicines, and fuel.

The government’s response to COVID‑19 has evolved from caution to the gradual imposition of increasingly radical measures.

  • In mounting a medical response, the centralization and verticality of the Cuban model allows authorities to adapt plans and resources in the face of new priorities. The Cuban health system, for example, is known for its national coverage and access to resources (including 848 doctors and 5.5 beds per 100,000 inhabitants), and it has experience dealing with epidemics. Decisions have been taken around the concept of epidemiological vigilance, including closing the borders on April 2 and bolstering research, although the inability to carry out massive testing has been a weakness. The government has also guaranteed workers’ income and employment, except for parts of the private sector and informal economy, and expanded food-rationing to a broader list of products.

The economic impact in the medium term should not be underestimated. GDP growth will enter negative territory. Financial problems will surely deepen. Shortages of an array of basic necessities are going to worsen. Restructuring of foreign debt is necessary.

  • Internally, Cuban policymakers are going to have to take into consideration the new socioeconomic structure of the country and the need to focus support where it’s needed most. The crisis provides a good opportunity to give substance to longstanding rhetoric about improving agricultural production. Greater flexibility in regulating private businesses is also an obvious policy option. Accelerating and broadening digital access throughout society should also be a priority under the wisdom of “not putting off till tomorrow what can be done today.”

The Cuban Government is not presiding over a terminal crisis, however. Even considering the system’s weaknesses before the pandemic, this perfect storm is not its responsibility. For the medical challenge, Cuba is prepared and probably will overcome some of the criticisms made abroad about its medical missions, as brigades of Cuban doctors deploy to 19 countries. The country’s biotechnology industry also stands to make advances. It’s too early to say whether Cuba will be able to profit from these opportunities, but Havana may benefit from its willingness and ability to be a responsible international partner.

  • Washington’s policies also put it in sharp contrast with China, which continues to provide help during these difficult times. If the pandemic has made anything clear in Cubans’ minds, it’s that the United States is disqualifying itself as a positive force for change on the island.

April 17, 2020

*Ricardo Torres is a professor at the Centro de Estudios de la Economía Cubana at the University of Havana and a former CLALS Research Fellow.

 

Lessons Learned from Last Century’s Climate Change Migration

By Elizabeth Keyes*

Then and Now

Left: Migrant Workers in California, 1935/ Dorothea Lange/ U.S. Library of Congress/ Wikimedia Commons (modified)// Right: Central American migrants find quarter in southern Mexico/ Peter Haden/ Wikimedia Commons (modified)

Central Americans seeking asylum in the United States are not the first victims of government policies that discourage migration, send law enforcement to turn them away at a border, ban them from receiving public benefits, and pass laws seeking their immediate repatriation: the Dust Bowl migrants, almost 100 years ago, faced the same fate. Their story is more complex than that of John Steinbeck’s Joad family turning to labor in California’s “factories in the field.”

  • Drought came to Oklahoma and other Dust Bowl states after decades of agricultural practices that prioritized heavy production at the expense of land management and conservation. Corporate farmers favored practices maximizing short-term yield over long-term sustainability. The New Deal bought up farmland, displacing tenant farmers. Relief at the peak of the Dust Bowl in 1934 was mismanaged, and it did not help people stay.
  • Affected residents headed to California, which during a previous economic boom had sought out “migrant” labor from elsewhere in the United States. Many had a relative or friend already in California who could provide a migration pathway, just as happens with migration in 2020. Those with friends or family in the cities fared relatively well, but those who ended up in the labor camps of California’s valleys fared extremely poorly.

As the state’s boom ended in the Great Depression, California made efforts to discourage the migrants, erecting billboards along Route 66 warning would-be migrants that California was no longer an ideal destination. The state criminalized the act of helping indigents migrate, and the Los Angeles Police Department set up “bum blockades” to refuse them entry.

  • California’s responses looked a lot like current efforts to stop migrants seeking to enter along the U.S. border with Mexico: criminalization and walls. Internally displaced persons in the 1930s faced the same kinds of xenophobia that the migrants from outside the United States do today, defining “Okies” as a problematic “other” as if from a foreign country. Although they were, indeed, “fellow Americans” and driven from the land by environmental disaster, it took almost a decade for the U.S. Supreme Court – in Edwards v. California – to clarify that states could not bar migration from other states, and to affirm an ethic of sharing hardships across state lines.
  • The Dust Bowl migrants entered a labor market with strong racial and class inequities. As the United States deported roughly a million Mexican and Mexican-American farmworkers between 1929 and 1936 (with an estimated 60 percent of those being U.S. citizens wrongfully deported), the new migrants took over those jobs.

State and international borders differ legally, of course, in critical ways, but the experience of Dust Bowl migrants nonetheless sheds light on the possibilities for Central American and Mexican migrants today. Climate change is again increasing the drivers of environmental displacement, both internal and international, both slow-onset and acute. Just as a focus on environmental justice and sustainable agriculture would have reduced the need for migration out of the Plains in the 1930s, work done now to mitigate and adapt to climate change would help Central American and Mexican farmers stay in place. And in the communities receiving migrants, we see that California adapted and accommodated them once the Supreme Court refused to endorse California’s deterrent strategies. The Court recognized in the strongest terms that California was enduring great upheaval but determined that it could not use its state border to limit that upheaval.

The same Court also routinely upheld the federal government’s right to use the national border to inoculate the country “from difficulties common to all.” International immigration is legally, if not dynamically, morally or philosophically, different from internal migration.

  • Nonetheless, the Edwards decision provides a wonderful exercise in “what if” thinking. Because of the decision, those suffering in Oklahoma and Kansas had a place to go and could build new lives in California, changing the state but not ending it. Indeed, the state has the largest economy of all 50 states and by one measure is the “14th happiest” in the nation. California is an example of state resilience to migration, even dramatic levels of migration.
  • Perhaps the pain of the Dust Bowl – the forces that sent people migrating and the realities they faced in their new homes – offer us important lessons for international migrations caused by climate. There is no international-style Edwards approach, and refugee law offers no good answers. But the full, complicated Dust Bowl history encourages us to move beyond fear and xenophobia to face the challenges forthrightly, knowing that we do have a remarkable capacity for adaptation.

April 15, 2020

* Elizabeth Keyes teaches law and directs the Immigrant Rights Clinic at the University of Baltimore School of Law.

 

 

 

 

Nicaragua in the Time of COVID-19

By Kenneth M. Coleman*

Presidente de El Salvador participa en Cumbre SICA-Nicaragua.

President of Nicaragua Daniel Ortega /Flickr / Creative Commons

Nicaraguan President Daniel Ortega and his wife, Vice President Rosario Murillo, have not appeared in public for 28 days, but their response to the threat of COVID‑19 has consistently been the equivalent of “Don’t worry, no problem, we got this!” Government policies suggest it is going out of its way to pretend the virus poses no threat to Nicaraguans.

  • On April 4, the pro-Ortega city council of Altagracia on the tourist island of Omotepe promoted a motorcyclist gathering by offering free fuel and free transport on very crowded ferries. Press photos of the event show no masks and no social distancing.
  • Several days earlier, the government orchestrated the arrival of hundreds of supporters to celebrate the opening of a bridge in Granada, with a similar absence of anti-viral measures.
  • In late March, “health brigades” were mobilized to visit households and provide information on how to avoid COVID‑19, but some citizens refused the visitors because of the lack of social distancing.
  • Private schools have closed, but public schools and universities have not. Media reports are that primary and secondary teachers are being pressured to schedule exams to compel attendance. Some parents are keeping their children at home anyway.
  • On March 13, Murillo convoked a march (but did not personally participate) entitled “Love in the Time of COVID-19,” with thousands of party supporters and public employees and their children marching in close contact.

Citizens say the government’s posture has not been reassuring and are taking action themselves. The government has not revealed the number of tests conducted, but has reported only six cases of coronavirus, all people who had been abroad, with one confirmed death. It reports no community transmission inside Nicaragua, although three Cuban women have tested positive for the virus after visiting Nicaragua. Dora María Téllez, who was a Health Minister in the 1980s, says the government is not seriously pursuing contact tracing. Costa Rica’s admission of 502 confirmed cases makes people doubt Managua’s figures. Local leaders, most affiliated with the government, have shown little willingness to taking independent action on the virus.

  • In a mid-March survey, CID-Gallup found that 65 percent of Nicaraguans were “not at all satisfied” with the government’s handling of the virus, while 11 percent were “dissatisfied.” In the same survey, 57 percent said they felt there was “much risk of contagion” in their neighborhood, and another 25 percent felt there was “some risk.”
  • Taking matters into their own hands, family-owned market stalls in public markets started closing weeks ago. Two major companies in maquila zones last week furloughed 19,000 workers to protect their health. Citizens have created an Observatorio Ciudadano COVID‑19 to collect data on cases and exposures to the virus. The Superior Council of Private Enterprise (COSEP) has pleaded with the government to close schools and allow private hospitals to test for the virus, and it joined the Central American Institute for Business Administration (INCAE) and other private-sector organizations to encourage social distancing, urge debt relief for the poor, and create a Humanitarian Assistance Fund. The government has not responded to their offers to cooperate.

Nicaraguan experts, such as epidemiologist Leonel Argüello, fear the country could eventually have as many as 500,000 COVID‑19 infections, implying thousands of deaths. The consequences for Nicaragua’s years-long political standoff are unclear. While the business community is extending an open hand to deal with the crisis, the government seems disinclined to cooperate. The one situation that would alter this dynamic is if Daniel Ortega himself – who has not appeared in public for four weeks now – were to be incapacitated. On COVID‑19, Rosario appears to be calling the shots, but if Daniel is seriously ill, internal dynamics, over time, might prove unpredictable. Were he to die, it would put in jeopardy the dynastic succession that he and Murillo (and her two sons) have worked hard to put in place. Rosario and the sons are already under sanctions by the U.S. Department of the Treasury. Even members of their party might see some disadvantages to having a president unable to conduct most international banking transactions.

April 9, 2020

* Kenneth M. Coleman is Director for Partner Programs at the Association of American Universities. The views expressed herein are his own.