As South America begins to emerge from the turmoil of the COVID-19 pandemic, the region’s economic recovery has been a story of divergence — some countries are rebounding quickly while others continue to struggle with persistent roadblocks that stymie growth. Three of the continent’s largest economies — Brazil, Chile and Argentina — provide contrasting stories of recovery, influenced by particular challenges and domestic responses.
In Brazil, the economic rebound has been no smooth ride. Brazil, the largest economy in Latin America, was severely affected by the pandemic, experiencing a steep decline in GDP and an increase in poverty levels. But since President Luiz Inácio Lula da Silva came to power, some stabilizing has occurred. Central to this recovery has been a focus on welfare programs that seek to pull millions of people out of poverty. The Bolsa Família program, for example, has been expanded to support the most vulnerable, while government-backed credit lines have kept small businesses alive. But inflation continues to be a headache for the Brazilian economy, stubbornly high even as the central bank has moved to bring prices under control. This ongoing inflation has reduced purchasing power and affects middle and low-income households more broadly. Unemployment, though on a downward trend, remains above levels seen prior to the pandemic, and more so in rural areas.
Chile has a more straightforward outlook, but it’s not without complications of its own. The Chilean economy did rebound quickly, aided by a strong mining sector and an effective vaccination campaign. The government’s pledge to foster sustainable growth, backed by foreign investments, has also kept the wheels turning in industries such as copper mining and lithium production. But inflationary pressures, in part from geopolitical disruptions to supply chains, and labor market challenges remain a roadblock to progress. Chile’s social policies, intended to soften inequality, are under scrutiny, with critics saying they do not do enough to narrow the gulf between the rich and the poor. And although unemployment rates are at record lows, stagnating wages and an absence of available jobs in some regions create a sense of discontent that may reverberate across the electorate in the years ahead.
Argentina’s story of recovery, by contrast, is a complex tale of fiscal difficulties and misguided policies. The country’s inflation has soared to dire levels — exceeding 100 percent in recent months — weighing on the broader recovery efforts. Argentina’s agricultural export dependence has worked well for it, but the country suffers crippling debt and low foreign investment, which severely curtail its capacity to stimulate economic growth. Meat prices soared 80 percent from January of last year to January of this year, and Argentine inflation and peso depreciation have rendered fiscal tightening and International Monetary Fund negotiations ineffective. Almost a third of the population lives on less than around $1.25 a day and almost 40% of Togo’s people are below the poverty line. Unemployment has declined a little, but informal labor is still a major problem, and many Argentinians haunt unstable, low-paying jobs as a last resort.
Overall, South America is leaning towards recovery—but the new normal following the pandemic looks different across the continent. Brazil is struggling to reconcile high inflation with social programs, Chile is grappling with how to deal with its newfound prosperity as inequality grows, and Argentina is mired in an inflationary swamp, unable to escape its economic crisis. The path to the eight-hour days of fullness ahead is long, and the future is anything but certain, but the adaptability and resilience of the people of the region remain the telomeres of hope. It is a complex road and only time will tell how South America progresses on it.
