The Organisation for Economic Cooperation and Development (OECD) has urged Latin American countries to help their small and medium enterprises with their wage bills, saying that strengthening the private sector at this moment of crisis is the shrewd way of achieving economic recovery quickly.
Presenting a keynote speech at a webinar organized by US-based think tank Inter-American Dialogue, Angel Gurria, the Secretary-General of OECD, said that ultimately “much of the recovery efforts will fall on the private sector.”
Reducing work hours for employees and providing financing with public loan guarantees can also help to limit the damage caused by the COVID-19 pandemic, he added.
Micro, small and medium enterprises represent 99% of firms and 60% of employment in LAC. Currently, according to OECD, these businesses are facing the risk of falling into bankruptcy.
“This increase in unemployment could have a severe impact on the vulnerable middle class (37% of the population), which, in its majority, does not have access to social protection,” the Secretary-General warned.
The international organization expects foreign direct investment (FDI) to decrease by more than 30% this year in the region.
The Secretary-General blamed the region’s heavy dependence on commodity export for its current economic weakness.
“The simultaneous decline of commodity and oil prices will create additional challenges for fiscal and external accounts in several countries of the region,” he said.
Considering his comment, there has been an unprecedented decline in composite leading indicators (CLI) in major economies across the region. Brazil is in the midst of a sharp slowdown, with its CLI indicator decreasing by 7.8%.
There are four OECD member states in the region, which include Mexico, Colombia, and Chile. Costa Rica also joined the organization recently.