Across South America, the second half of the past decade had brought increasingly dire problems. With the decline of global natural resource prices between 2011 and 2014, its two largest economies, Brazil and Argentina, saw steep declines in economic output, and Venezuela, once its wealthiest country, underwent a calamitous collapse. Political freedoms weakened in the countries where they were most fragile as their ruling parties solidified their control over states they had once dominated through bread and circus. By the Economist’s Democracy Index, Bolivia, considered a flawed democracy akin to Paraguay or Mexico in 2008, had become an authoritarian-leaning hybrid regime by 2019, ranked just six spots above Erdogan’s Turkey. In the same period, Venezuela declined from a hybrid regime into a full-fledged autocracy, much more closely aligned with Cuba, China, and Iran than with any of its democratic neighbors. In those countries where democratic institutions struggled to retain their legitimacy, social and political tensions simmered close to the surface. In 2016, Colombia concluded a peace process with the FARC terrorists that would fail to deliver a shared sense of justice, fueling political polarization in subsequent years. In 2018, Peru’s Congress removed then-president Pedro Pablo Kuczynski from office, inaugurating a kafkaesque political crisis that would only be resolved after three subsequent presidencies, one snap congressional election, and widespread protests in major cities. In 2019, civil unrest in Chile caused numerous deaths, over a thousand injuries, and widespread damage to public infrastructure and private property.
Then, the pandemic struck.
In an already fragile context, the region struggled as cases soared. As of November 24, four South American countries—Peru, Argentina, Brazil, and Chile—ranked among the top 12 countries in the world for cumulative COVID-19 deaths per million people. At a staggering 744 for the entire continent, this rate lies well above the world average of 183 or even the European average of 490.
Hospital services, in Peru and Brazil specifically, were too scarce to adequately serve all of their ill. Moreover, the strict lockdown measures enforced early in the pandemic were especially harmful to economic activity in a region rife with informal and already precarious employment. That, alongside the high aforementioned risk factors causing the world’s investors to flee from the region in these globally difficult times, caused the broader region of Latin America, including South and Central America, Mexico, and the Caribbean, to see a 9.4 percent contraction in economic activity for 2020—greater than that of any other region in the world or any economic crisis in recorded the region’s history. The Financial Times recently suggested, in a conversation with World Bank regional vice-president Carlos Felipe Jaramillo, that the region was set to lose 20 years of progress in poverty reduction. The Spanish publication Europapress went even further, arguing that the region had undergone a “three-decade retrogression,” noting that poverty was set to increase by 37 percent. One might add that, given the reputation of the 1980s as a “lost decade” for Latin America, with scarcely any economic growth, the region may as well have returned to 1979.
While the region’s economic situation is undeniably catastrophic, this narrative of linear decline is pessimistic to the point of gross oversimplification. While this is more true of some countries than others, and despite all of the challenges outlined above, the fact remains that South America as a whole has made enormous strides over the past 20 years in not only reducing poverty but, more importantly, changing the very nature of poverty. A close examination of the evidence will reveal that the pandemic has not done away with these deeper transformations and that the challenges facing South America in the coming decades will not be those of the 1990s and 2000s, but completely different ones altogether.
Towards the Eradication of Misery
While incomes across the continent have undoubtedly contracted significantly since the onslaught of the pandemic, it is worth remembering that, according to World Bank estimates, as recently as the turn of the millennium, extreme monetary poverty was the norm for more than 40 million South Americans, who had to make ends meet on less than $1.90 a day. This amounted to about 12 percent of the continent’s population at the time and was roughly equivalent to the combined populations of Texas, Pennsylvania, and Iowa today. For historical and institutional reasons, these rates were comparatively low in the Southern Cone countries of Argentina, Chile, and Uruguay. The bulk of the extremely poor was concentrated in the heavily populated Brazil and their Andean neighbors of Colombia and Peru. While both Ecuador and Bolivia have relatively small populations, their staggeringly high extreme poverty rates of 28.2 percent and 28.6 percent made them more notable contributors than their population would suggest.
18 years later, in 2018, the total number of extremely poor had fallen to just under 18 million, more than halving the 2000 figure. This group now represents only about 4 percent of the continental population, and the three countries where it was most concentrated—Brazil, Colombia, and Peru—have all seen spectacular reductions in their populations living in extreme poverty: -65 percent, -69 percent, and -80 percent, respectively.
This regional achievement, it must be noted, has been consolidated despite the ongoing economic crisis in Venezuela, the only country in the region where, rather than decreasing, the population in extreme poverty has more than doubled over the last two decades. While precise economic data from the oil-producing dictatorship is understandably scarce, estimates from the World Data Lab project an extreme poverty rate of 21.4 percent for 2018, rising further to 35.4 percent in 2019 and nearly half of the population in 2020.
A similar pattern emerges from the Food and Agriculture Organization data on undernourishment. While over 42 million South Americans faced this condition in 2001, this figure fell to around 24 million by 2017. As has been the case for extreme monetary poverty, this improvement in living standards has largely resisted the combined tendencies of lethargic growth, political instability, and social turmoil that have plagued the region during the latter half of this period, growing only in Venezuela, where just under 7 million people, about a third of the national population, are now undernourished.
How exactly these achievements will be threatened as a result of the COVID-19 pandemic remains unclear. In an October 9 report, the World Bank forecasted that the number of extremely poor in Latin America, of which South America is the main contributor, would rise by between 13.6 percent to 18.2 percent from 2018 to 2020, which would imply an increase from about 18 million to between 20 and 21 million. While this increase should not be taken lightly, being the most drastic in recent memory, it does not even come close to reversing the progress made since the turn of the millennium. Given the tight relationship between food affordability and income, we should anticipate similar tendencies in undernourishment.
One crucial reason for this relative resilience in the face of an unprecedented economic crisis is that extreme poverty is linked to deficiencies in the provision of essential services, such as clean water and electricity, which have diminished significantly and irreversibly in South America. In a pattern that should by now be familiar, the population without access to basic drinking water services has fallen from a staggering 27 million to about 12 million between 2000 and 2017, while the population without access to electricity has fallen even more sharply: from 26 million to just over 3 million in the same period. This has meant that far fewer children have had to lug water from streams, taking hours from their education and risking the possibility of their loved ones contracting a deadly waterborne disease. Far fewer workers have had to return to a dark and cold home, and decreasing numbers of students have had to leave their school work incomplete as the darkness of the night enveloped their homes. These are not only enormous changes in quality of life, but they are also great facilitators of economic activity, since they allow people to more reliably provide for their families and seek opportunities to improve themselves. Regardless of the depth of the COVID-19 recession, the water treatment plants, pipes, wells, dams and copper wires that enabled them will continue to stand.
Urbanization Becomes Sustainable
At the root of these permanent improvements lies the latest turn in a basic demographic trend that has shaped the nature of poverty in South America for decades. In the mid-20th century, most countries in the region were predominantly rural. In all but Chile, Venezuela, Peru, and Argentina, according to United Nations data, less than 40 percent of the population lived in cities, and in all but Chile and Argentina, less than half did. However, throughout the second half of the twentieth century, all of these countries saw sudden and drastic increases in their urbanization rate. The reasons ranged from land scarcity to the growing mechanization of agriculture and the rise of rural terrorism in the cases of Colombia and Peru. Different countries experienced their booms at different times, ranging from the early 1950-1970 expansion in Venezuela to the much later 1975-2000 expansion in Bolivia. Yet, the basic trend was essentially the same, contributing to the consolidation of the region as the most urbanized in the developing world.
Simultaneously, given early improvements in medicine, nutrition, and sanitation, the region saw an enormous overall population boom throughout the second half of the last century. In the 1950s, South America’s population grew at almost twice the rate of the United States, and as recently as the 1990s, it continued to grow at American baby-boom levels.
In conjunction, these trends meant that as millions of people arrived at South America’s relatively modest and unproductive cities, governments struggled to provide the infrastructure, services, and opportunities that they required. As a result, slum populations skyrocketed, and the improvised agglomerations of wood, zinc, and brick replaced the humble farmhouse as the home of the economically worst off.
In the past 20 years, however, both the rate of population growth and that of urbanization have decreased significantly, allowing for the sustained improvement of urban settlements and reduction of slums. While the definition of a slum is flexible in practice, the United Nations Human Settlements Program has classified as such all households lacking either improved water access, improved sanitation, enough living area, or long-term durability. Under this definition, the five countries in the region for which long-term data is available have all shown remarkable progress in this regard. Both Peru and Bolivia, where a clear majority of urban dwellers lived in slums in 1990, had reduced this phenomenon to around four tenths of the population by 2014, while Colombia, Brazil, and Argentina saw similar reductions from about a third of their urban populations in 1990 to about a sixth in 2014.
As with the more specific improvements in water and electricity infrastructure, this move towards sustainable urbanization will not be reversed by the COVID-19 pandemic, regardless of how far people’s incomes may fall temporarily, because they correspond to physical, permanent changes in the very structure of South American life. To suggest, therefore, that 20 or 30 years of progress have been wiped out is not only perversely pessimistic but is also an inadequate call to consider how the region’s governments should claw back through a path that has already been traversed, rather than how they should confront the new challenges of the coming decades.
The Problems Ahead
Concerning the obvious task of recovering from the pandemic economically, different South American countries are set to fare very differently based on their fiscal responsibility in the years before it. According to a report from the Economist Intelligence Unit, the Pacific Alliance powerhouses of Peru, Chile, and Colombia, where pre-pandemic government debt was low enough to fund recovery initiatives without significantly affecting their credibility in the eyes of investors, will likely return to pre-pandemic levels of output in 2022. Brazil and Argentina, by contrast, are set to wait for their recovery until 2023 and 2024, respectively. The earliest date predicted for a viable recovery in Venezuela is almost a decade from now, in 2028.
During this period of reconstruction, paradoxically, there is strong evidence that the very poorest will not be the hardest hit, given the wide-ranging efforts of South American governments to provide temporary safety nets in light of the pandemic. Instead, the heaviest toll will fall on the moderately poor and the vulnerable lower rung of the new middle class, people whose survival needs are largely accounted for but who will require abundant and well-paid employment opportunities to avoid falling into debt, respond effectively to emergencies, and otherwise thrive as economically secure citizens. Wisely investing in productive infrastructure, tackling corruption to improve government efficiency, and stimulating private investment on all scales will be more crucial than ever to that end.
Looking further into the future, it is worth concluding that the rapid population growth that stimulated late-20th century unsustainable urbanization brought with it a key economic benefit. As the working-age population increased more rapidly than both the elderly and underage populations, the age dependency ratio, or the number of non-working age people as a percentage of the working-age population, declined across the continent, reaching relative lows almost everywhere circa 2020. This has meant that the funding required to sustain the education and pension systems, among other expenses, has been covered by ever-greater numbers of workers. However, as population growth slows down and the workers of the 1980s-2000s reach retirement age, this ratio is set to increase dramatically, potentially threatening the sustainability of the aforementioned systems. For this reason, it must be a regional priority to improve the productivity of workers well into the future. Otherwise, ever-slowing economic growth, rising national debt, and a prolonged stagnation in standards of living will all become more permanent problems, as will the political and social crises that these conditions can engender, as the past decade has shown.
What is required now of South American leaders is the ability to take note of the achievements of the past, to consider the policies of those countries that are faring best and worst in the present, and to put forth paradigms designed to solve the problems of the future just as much as they serve to decisively close the chapters of decades prior.