Virus shatters Latin America’s middle class dreams

When the coronavirus hit Chile and abruptly cost Lorena Rodriguez her job, the 47-year-old nanny took a painful decision to pawn her jewellery — gifts from decades earlier — for cash.
Like more than half of Latin Americans, she worked in the informal sector, looking after two children in an upmarket area of the coastal city of Valparaiso but living comfortably on joint income with her husband of 700,000 pesos ($905) a month. Then suddenly, worried about infection risks from Rodriguez’ bus journey to work, the family cut her job in March.
Without a contract, she could not receive benefits like unemployment pay or social support, despite living in one of the region’s wealthiest nations. A 100,000-peso ($126) emergency payment from the government soon ran out, forcing her to the pawnbroker.
“It was a last resort,” said Rodriguez, who swapped her rings and bracelets for a 340,000-peso loan to support herself and her husband, a retired member of the Armed Forces. “I had a stable job. We lived pretty well — at least without too many worries. It’s hard to see now where all this will end.”
Millions in Latin America’s middle classes are similarly being dragged back into poverty as COVID-19 has exposed the fragility of welfare nets and governments’ lack of financial firepower. The region’s labour market has been hit harder than anywhere else in the world.
After economic stagnation and crises in the 1980s, Latin America had seen its middle class thrive thanks to a commodity boom that drove growth in the 2000s and helped pull 60 million people out of hardship.
Now, the region of 650 million people will see its economy contract more than 9 per cent this year, according to UN estimates, the worst in the developing world.
Poverty is set to surge back to 2005 levels. Many economists say the crisis has exposed Latin America’s neglect of long-standing weaknesses: reliance on low-productivity sectors such as mining and agriculture, failure to bring more workers into formal jobs, and lack of effective tax systems to redistribute wealth concentrated among a small elite.
“This crisis should serve as a wake-up call for us to mobilise against the disparities and gaps that have resulted in an increasingly fragile world,” Argentina’s Foreign Minister Felipe Sola told a recent meeting of the G20.
According to Asier Hernando, regional director of the charity Oxfam, the pandemic could push 52 million more people into poverty and leave an additional 40 million jobless. Women and indigenous groups will be hit particularly hard. “There is no cushion. If you fall, you fall a lot,” he said. “This could break the social contract of the region and could lead to years of enormous social conflict.”
After protests in several South American countries last year, the pandemic has cast a further spotlight on hunger, inequality and lack of state support. — Reuters

Adam Jourdan