COVID-19: CAF Discusses Public Policies to Cope with Crisis in Latin America

With the aim of presenting and analyzing the measures taken by countries of the region in the context of the COVID-19 pandemic, as well as possible scenarios for Latin America, CAF—development bank of Latin America—held a video conference featuring ministers of Economy and Finance and members of the CAF Board, as well as special guests such as Augusto de la Torre, former Chief Economist for Latin America and the Caribbean at the World Bank, and Andrés Velasco, Chile’s former Minister of Finance and current Dean of the School of Public Policy at the London School of Economics.

The presentation reviewed how public policy efforts by Latin American governments have focused on protecting household spending capacity and keeping businesses afloat. In this regard, unprecedented measures have been announced to expand credit and transfer funds to businesses and households. In order to provide liquidity to maintain business payment chains, central banks have cut interest rates and statutory reserves. The renegotiation of loans to businesses and households has also been encouraged, avoiding impact on debtors’ rating. On the fiscal front, collateralization programs have been created for business loans, particularly for SMEs. To protect households, unemployment insurance has been bolstered and existing social transfer, conditional transfers, bonus and food programs have been expanded.

At the closing of the event, CAF executive president Luis Carranza Ugarte presented the main findings, highlighting the importance of working on liquidity mechanisms that help preserve the health of the banking and business system. “In the midst of this crisis, unprecedented for the world and our region, we need to adopt bold, carefully designed, tailored public policies that help sustain the productive sector and protect jobs and, in particular, mitigate the impact on the most vulnerable social sectors. Another vital task is to promote a renewed process of international cooperation to transfer liquidity from developed to developing countries,” said Carranza Ugarte.

Since COVID-19 was declared by the World Health Organization (WHO) as a Public Health Emergency of International Concern (PHEIC), CAF has offered a number of tools such as a contingent credit line for up to USD 50 million per country for direct support to public healthcare systems; a rapid Emergency Credit Line of up to USD 2.5 billion that will allow authorities to provide a quick and timely response to mitigate the effects of the spread of COVID-19, help ensure continuity of business operations and economic recovery; in addition to non-refundable cooperation funds for the donation of essential supplies and support to the healthcare sector for USD 400,000 per country.