July 03, 20 - 11:02 am - LABS

More than 2.7 million companies may close in Latin America

In the next six months, more than 2.7 million companies may close in Latin America, mostly from medium to small companies from the commerce and tourism sectors. This will may lead to a loss of 8.5 million jobs, according to the Special Report COVID-19 No. 4 entitled Sectors and businesses facing COVID-19: emergency and reactivation by the Economic Commission for Latin America and the Caribbean (ECLAC).

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According to the ECLAC report, more than a third of formal jobs and a quarter of GDP in Latin America and the Caribbean are generated by sectors that the coronavirus crisis has hit hard. On the other hand, the organization points out that less than a fifth of the formal labor market and the generation of wealth in the region is in the hands of businesses moderately affected by the current crisis.

The crisis is hitting industrial sectors with potentially greater technological dynamism the hardest and, therefore, it will deepen the structural problems of the region’s economies. This means that if the proper policies are not implemented to strengthen these branches of production, it is highly probable that a regressive structural change will be set in motion that would lead to the re-primarization of the region’s economies.

Alicia bárcena, executive secretary of ECLAC, during the presentation of the report.

According to the study, the vast majority of companies in the region have seen significant declines in their revenue and are struggling to maintain their activities, since they face serious problems in fulfilling their wage and financial obligations and difficulties to access financing for working capital.

ECLAC recalls that, from March, several governments in the region have announced a broad set of measures to sustain the production structure and avert job losses (the organization has identified 351 actions, grouped into six categories). The deferment of payments and improved access to credit has been the most common actions taken to confront the emergency caused by the current crisis.

These measures assume that companies will earn profits to be able to pay back loans, pay taxes and make deferred payments, but, according to the ECLAC, “the outlook does not indicate that this will happen by itself in the next couple of years since it is very likely that the business sector recovery will be slow and gradual, the United Nations organization warns.”