In this context, it is anticipated “low growth rates of 1.6% and 2.3% in 2023 and 2024, respectivelysimilar to the low levels observed in the 2010s and insufficient to achieve significant progress in terms of poverty reduction”.
“Most economies have recovered to their pre-pandemic levels, but this is not sufficient. The countries of the region have the opportunity to rebuild better after the crisis and achieve fairer and more inclusive societies,” he said. carlos philip jaramillo, Vice President of the World Bank for Latin America and the Caribbean. The director asserted that “in addition to implementing the necessary reforms and investments to accelerate growthgovernments must face the structural costs: the years of schooling lost, the vaccines not provided and the delayed impact of food insecurity that the recovery of GDP masks”.
The report assesses that the region is well positioned to rethink its development trajectory. Employment practically recovered its pre-pandemic levels, schools reopened and, with exceptions in the Caribbean, the high rate of vaccination against Covid-19 allowed a return to normality.
However, it considers that the consequences of the crisis persist and must be addressed. Although poverty fell from 30% in 2021 to 28.5% in 2022, it is still at a high level; while he points out that the long-term costs of the crisis in health and education must be remedied urgently, both to revive growth and to mitigate the increase in inequality.
Savings in public spending
“Managing the growing burden of debt resulting from the crisis while generating sufficient fiscal space to make investments that promote growth requires new sources of revenue that will need to be carefully analyzed, as well as better use of existing spending. On average, 17% of public spending could be saved and, in two thirds of the countries, these savings would serve to eliminate the current fiscal deficits”, he affirmed. William F. MaloneyWorld Bank Chief Economist for Latin America and the Caribbean.
The report argues that countries should carefully analyze their public spending and tax policy options to promote equity and avoid potential adverse effects. This includes improving spending efficiency: “on average, 4.4% of GDP — or 17 percent of public spending — is wasted on misdirected transfers, poor public procurement, and inefficient human resource policies”.
Analyzing the region’s tax situation, the report considers that in terms of VAT some countries —such as Bolivia, Ecuador, Mexico, Paraguay and most Central American countries— could have room for additional VAT increases that are relatively exempt of costs, “while in Argentina and Uruguay —and to a lesser extent Brazil and Colombia— these would have a decidedly negative impact on growth”.
The report specifies that in Argentina, along with other Latin American countries such as Brazil and Ecuador, the aggregate tax burden varies between 30% and 35% of GDP, thus approaching the levels observed in the OECD. In other countries, such as Costa Rica and the Dominican Republic, the aggregate tax burden is around 15%.