Article by José Andrés Oliva Cepeda.
Like for many other Central Americans, Rafael's life changed in March 2020 due to the pandemic. He lost his job in a factory. Many months later, he is still unemployed and needs to ask for help to find sustenance for his two children.
To respond to the social crisis resulting from the economic losses and the public health emergency that affected people like Rafael, Fusades and Commitment to Equity Institute (CEQ), supported by a Southern Voice grant, joined forces. The goal was to research the complex social aftershock of the pandemic. We wanted to measure the impact of COVID-19 on poverty and inequality and analyze the effectiveness of the policies implemented during the quarantine.
Measures taken in all three countries:
When the pandemic started, the governments of the Northern Triangle of Central America (NTCA) - El Salvador, Guatemala and Honduras - implemented drastic measures, which practically paralyzed the economy. At the time, the belief was that this was the only way to stop the spread of COVID-19.
A forced shutdown was imposed for activities that were considered non-essential. On 16 March 2020, Guatemala closed its borders and suspended non-essential activities. A day before, Honduras declared a national curfew. And El Salvador closed its borders and schools already on 11 March, decreeing a mandatory quarantine a few days later.
The confinement measures for citizens and the restricted measures for businesses in all three countries lasted approximately four months. They had profound consequences for the well-being of families. It was not until 12 July that Honduras began a progressive reopening of activities, while Guatemala re-booted its economy on 26 July. El Salvador started phase one of its reopening in early June.
The closure resulted in a severe shock to the economy. Inactivity and closed borders severely damaged productivity. According to the International Monetary Fund ( IMF ), these economies will shrink by -9% in El Salvador, -6.5% in Honduras and -2% in Guatemala. This scenario will affect employment, income, and poverty numbers. Also, these countries lack social protection networks to cope with the impact of COVID-19. They have limited fiscal space to generate responses to mitigate or neutralize the economic effects of COVID-19 in the long-run.
The joint research results indicate that the pandemic and the political decisions affected all social sectors, and its effects were perceived throughout the income distribution chain. The crisis affects everyone, not just the poor. A substantial percentage of the population moved from a situation of non-poverty to poverty, which affects the achievement of UN Sustainable Development Goal 1 ( no poverty ) in this region directly.
Our analysis uses two types of extreme scenarios: 1) A smaller proportion of households loses relatively large amounts of at-risk income. This is called “concentrated losses”. 2) Many households lose a relatively small amount. Then it is called "dispersed losses". El Salvador had the highest increase in poverty among the three countries. According to the concentrated losses scenario, there was a 9.8% increase in extreme poverty. In Honduras, the increase was of 5.5%. While in Guatemala, poverty grew by 2.1%.
The results show that COVID-19 in the Northern Triangle created more poverty . In all cases, destitution percentages are higher than before, even taking into account the subsidy programs. For example, in 2020, on the concentrated losses scenario, using a poverty line of USD 3.2 per day, El Salvador, Guatemala, and Honduras, will have an 11.5%, 33.6% and 50% poverty rate, respectively, even after the social measures.
In sum, social support had a positive effect in reducing the impact on poverty but was not enough to maintain the rate at the levels before the pandemic. We conclude that what has been done so far is not enough. More support is needed to rebuild a more inclusive and sustainable economy and target more help to vulnerable groups.
The expectation to eradicate “extreme poverty […] for all people in the world” by 2030, as per the UN Sustainable Development Goals, seems now unachievable for this part of Central America. Rafael, and others in the same situation, need fast solutions to escape poverty.
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