Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

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Overview

  • After several years of slow growth, the Latin American and the Caribbean economy is facing a new setback as the COVID-19 pandemic slams the global economy.

    Social turmoil affected growth in parts of the region in 2019. This year, the entire region is suffering from low oil prices and the impact of the deadly novel coronavirus. Although most countries in the region have enforced measures to avoid contagion, the outbreaks have recently spread rapidly, and the economic impacts of nationwide business closures and mobility restrictions have been sudden and severe.

    Added to this are external shocks, which vary in impact from country to country. Demand from China and developed countries, curtailed by the pandemic, will fall dramatically, affecting commodities exporters in South America as well as exporters of manufactured goods and services in Central America and the Caribbean. Flight restrictions are already hitting the Caribbean’s tourism sector, a main source of income for many small island states.

    The multiple domestic and external shocks deriving from the pandemic will cause regional economic activity to contract by 7.2% in 2020. This will be a far deeper recession than the ones that occurred during the global financial crisis in 2008-2009 and the 1980s Latin America debt crisis. The outlook assumes economic activity will fall to its lowest ebb in the second quarter of the year, when mitigation measures are at their highest levels. Under this scenario, a normalization of domestic and global conditions would enable regional growth to recover to 2.8% in 2021.

    There are other challenges. The region’s countries do not have the fiscal space of developed countries. Indeed, some were facing financial crises before the COVID-19 outbreak. What’s more, high levels of informality make it hard to provide relief through tax deferrals and wage subsidies to many firms and households. This informality combined with the low levels of funds makes designing an adequate policy response all that much more crucial.

    The hardship from the crisis will be enormous for large segments of the population. Many households live hand to mouth. They do not have the resources to cope with the economic lockdowns and quarantines needed to contain the spread of the virus. Many workers are self-employed, and a raft of wage earners are paid under the table. Reaching these workers through financial transfers is more challenging than in formalized economies. Many households also depend on remittances, which are collapsing as shutdowns in host countries affect the incomes of migrants.

    Given the unprecedented nature of the COVID-19 pandemic, forecasts of economic performance in 2020 could change, dramatically even. This poses a challenge. The types of policy responses needed to rekindle economic activity are vastly different in a sharp, temporary downturn than in a major, long-lasting recession. Assessing the situation correctly is crucial for countries to operate under common assumptions about the breadth and depth of the crisis, make policy decisions, and build consensus for them from the public and key stakeholders. Unfortunately, the severity of the global decline in output remains highly uncertain, and as such the impact on the region’s economies.

    The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response such as by increasing disease surveillance, improving public health interventions, and supporting the private sector to sustain operations and jobs. It is deploying up to $160 billion in financial support over the next 15 months to help countries protect poor and vulnerable people, support businesses, and bolster economic recovery.  

    Latin America has an additional challenge: the worst immigration crisis in its history. Almost 5 million Venezuelans have left their homeland, fleeing an economic and social crisis now extending for more than five years.

    Latin America and the Caribbean are also exposed and vulnerable to natural disasters, from earthquakes to floods that can ravage entire regions, and hurricanes that devastate Caribbean states. The region is among the most vulnerable in the world because of the high population density in the areas where these disasters strike and the need for better risk management practices. Fortunately, we are getting better at understanding and managing these risks. Examples supported by the World Bank include the Pacific Alliance catastrophe bonds for earthquakes. Risk sharing across countries through mechanisms such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) can also provide readily available funds for recovery after a member country is hit by a hurricane.

    Last Updated: Jun 26, 2020

  • Our strategy has three pillars: promote inclusive growth, invest in human capital, and build resilience. This includes encouraging better governance and economic integration as well as leveraging private finance to address the region’s pressing development needs. The World Bank is also focused on improving the lives of the most vulnerable people, including the historically excluded groups such as women, Afro-descendants, and indigenous peoples. Partnering with the many different voices of society is key to these efforts.

    But given the urgency of the COVID-19 pandemic, the Bank is working with member countries to accelerate support. On April 2, the Bank started rolling out its first batch of Latin American- and Caribbean-specific projects approved by its Board of Directors as part of a global response to COVID-19 that in the first phase will total up to $14 billion. Support for Latin America and the Caribbean in this first round amounts to $100 million for four countries. An additional $170 million has been disbursed after redirecting ongoing operations in several countries in the region as well.

    These projects will enable countries to minimize loss of life, strengthen health systems and disease surveillance, mitigate the pandemic’s economic impact, and work with partners and the private sector to address supply chain issues and delivery. 

    Four new projects have been approved as part of a first round of support to fight COVID-19 in Argentina, Ecuador, Haiti, and Paraguay. Work on COVID-19 programs has also been initiated in other countries, which will be announced in due time.

    Argentina

    The $35 million in funding for Argentina will support virus detection and the government’s response efforts to COVID-19. Specifically, it aims to quickly identify new cases, provide timely care, minimize the spread of the disease, and prepare the health system for increasing levels of demand. Additionally, it will strengthen Argentina’s network of public health labs and overall epidemiological capacity for the early reporting and diagnosis of cases, and minimize risks for frontline health workers, among other actions.  More information: press release

    Paraguay

    Paraguay’s operation of $20 million focuses on bolstering the national health system for emergency preparedness and to respond to COVID-19. It will strengthen the country’s overburdened health system—it is currently dealing with a dramatic outbreak of dengue—to limit the transmission of COVID-19. Additionally, the financing will be used to buy laboratory equipment and technology systems for prompt case detection and contact tracing, strengthen clinical care capacity, and equip primary health care facilities and hospitals for the delivery of critical medical services. More information: press release

    Haiti

    A $20 million grant will help Haiti prevent, detect, and respond to COVID-19 while also strengthening national systems for public health preparedness. This IDA grant will provide the country with immediate support to minimize COVID-19 transmission through increased testing for early detection and the assembly of rapid response teams to contain outbreaks. It will also mobilize additional health staff and provide equipment to improve the care of patients who become ill. More information: press release

    Ecuador

    Ecuador’s operation of $20 million will help the country respond to COVID-19 by bolstering its national public health system. The project will finance the purchase of medical supplies and equipment to expand the number of intensive care units and isolation rooms. Additionally, it will contribute to financing a national communications strategy on the pandemic and the dissemination of prevention and protection messages. More information: press release

    In addition to these projects, the following countries are getting support as part of the COVID-19 response activities: the Dominican Republic through a $150 million loan with a catastrophe deferred drawdown option (CAT DDO), disbursed on March 24; Panama through a development policy loan with a CAT DDO of $41 million disbursed on March 25; and Bolivia through the restructuring of an existing health project to address COVID19.

    Dominican Republic

    To address COVID-19, the Dominican Republic has activated a disaster risk management development policy loan with a deferred drawdown option for catastrophe risks (CAT DDO). This $150 million contingency credit line will help the country implement emergency measures to contain the spread and manage the health and economic impacts. Additionally, this financing will support increased testing and broaden social welfare programs. More information: press release

    Bolivia

    Bolivia’s $20 million project will finance the purchase of emergency equipment and supplies under an existing project to bolster the country’s health networks. This financing will be used to purchase reactive agents and supplies for testing labs, medical instruments, equipment and supplies for intensive care, ventilators, and equipment for health services personnel. This will be complemented with technical support for monitoring suspected and confirmed cases. More information: press release

    Panama

    To support Panama’s response to the COVID-19 emergency, the World Bank authorized a $41 million disbursement out of a development policy loan that strengthens the nationwide disaster risk reduction agenda. Panamanian officials declared a national state of emergency on March 13 to address the health crisis, enabling the disbursement to be made on March 25 through the mechanism known as the development policy loan with a catastrophe deferred drawdown option (CAT DDO), contingent financing to address shocks related to disasters or health-related events.

    Colombia

    Colombia has also received funding to address COVID19-related impacts in the form of a CAT DDO operation totaling $250 million. This contingency loan is part of the country's disaster risk finance strategy, which enables it to be prepared in the event of a disaster or health emergency, such as COVID19. It was immediately disbursed. More information: press release

    Honduras

    The World Bank approved a $119 million credit for Honduras to allow the country to mobilize immediate financial resources to respond to the emergency caused by the COVID-19 pandemic. More information: press release

    Dominica

    On April 15, the World Bank mobilized $6.6 million to provide immediate funding for Dominica’s emergency response to the COVID-19 pandemic, focusing on enhancing health system capacity and strengthening food security. More information: press release

    Saint Vincent and the Grenadines

    The World Bank activated $4.5 million on April 17 to provide immediate funding for Saint Vincent and the Grenadines’ response to the COVID-19 pandemic, aimed at strengthening the capacity of the health system.  More information: press release

    Last Updated: Apr 28, 2020

  • The World Bank approved $4.3 billion in lending to the region in fiscal year 2018, including $3.9 billion in IBRD loans and $428 million in IDA commitments. The Bank also issued its first ever multi-country catastrophe bond between Chile, Colombia, Mexico, and Peru, valued at more than $1.3 billion. The priorities in the region centered on supporting inclusive growth through higher productivity and competitiveness, with an emphasis on investing in education, health, and other aspects of human capital. It also invested in infrastructure and worked to improve the countries’ abilities to manage and withstand shocks—such as natural disasters, economic upheaval, and crime and violence—while also promoting greater transparency and accountability. In addition, the World Bank prioritized the inclusion of groups that have traditionally faced exclusion, including indigenous peoples and rural communities. As countries’ needs often exceed public resources, the Bank supported activities and interventions that attracted private investment whenever possible.

    The World Bank has been increasingly tailoring its extensive financial, knowledge, and convening services to the region’s diverse needs. This is attracting countries to turn to the Bank for more than direct lending. They are increasingly taking advantage of services including risk insurance, commodity swaps, climate adaptation finance, technical assistance, convening assistance, and development research.

    Some program highlights include:

    Honduras: The Rural Competitiveness Project (COMRURAL) has contributed to increasing productivity, competitiveness, and market linkages among 7,200 small-scale rural producers of coffee, dairy, honey, and other products in Honduras. Each $1.00 invested by COMRURAL as part of a productive alliance has leveraged $1.50 from private financial institutions (around $12.5 million in total), increasing the financial inclusion and creditworthiness of small-scale farmers. Since 2008, the project has contributed to making agricultural value chains more competitive and increasing the volume of gross sales of rural producers by 23%. Producers supported by COMRURAL produce around 30% of all the special coffee exported by Honduras to the United States, Europe, and Asia.

    Colombia: The Orinoquia Integrated Sustainable Landscapes Project ($5.9 million GEF) was the last project approved for FY19. Other projects approved in FY19 were: (i) Clean Energy Development Guarantee ($41 million IBRD; $40 million CTF), (ii) support to Bogota’s First Metro Line—the first project in the series ($70 million), (iii) the Multi-Purpose Cadaster IPF ($100 million), and (ii) the Fiscal Consolidation, Competitiveness, and Migration Policy DPF ($718.5 million IBRD; $31.5 million GCFF).

    Panama: The National Indigenous Peoples Development Plan, designed jointly with Panama’s government and indigenous communities, is benefiting approximately 200,000 indigenous people, especially women and youth, who are the most excluded groups in the country. It supports investments proposed by the indigenous authorities in improving the access, quality, and cultural pertinence of the delivery of services in health, education, and water and sanitation. It also includes investments to improve governance capacity, planning, and coordination between Indigenous authorities and the government with a vision to contribute to breaching some of the largest levels of ethnic-based inequalities that exist in the region. Within the first months of implementation, two results can be highlighted: first, an executive decree was issued to legally formalize the National Indigenous Peoples Development Council; and, second, the traditional Indigenous Authorities accepted the inclusion of a woman advisor as part of each delegation that participates on the council.

    The World Bank is providing a $100 million loan to support the Colombia Multipurpose Cadaster Project to strengthen land tenure security and provide access to cadaster information in the selected municipalities. Overall, the project will support the government to strengthen the system for land administration to complete the national coverage of the multi-purpose cadaster and maintain information to support the property market in both urban and rural areas. 

    Caribbean: Ongoing World Bank support to building environmental and natural resource resilience in the Caribbean includes:

    ·      Developing renewable energy in Saint Lucia and Dominica and creating an insurance mechanism to include the fisheries sector in Grenada and Saint Lucia;

    ·      Building sustainable agriculture practices and competitiveness in Jamaica, the Dominican Republic, and the Organization of Eastern Caribbean States (OECS);

    ·      Expanding marine protected areas in Belize and strengthening protection and climate resilience of the Belize Barrier Reef;

    ·      Banning single-use plastics and Styrofoam containers across the OECS;

    ·      Developing a 7-megawatt geothermal energy plant in Dominica, the first in the Caribbean.

    Last Updated: Apr 28, 2020

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Washington, DC
María Castro Barton
1818 H Street NW, Washington, DC 20433
1 (202) 473-2984
mcbarton@worldbankgroup.org
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