The Economic Challenge of Surviving the Pandemic in Latin America

RIO DE JANEIRO, BRAZIL – The owner of four restaurants in Mexico City fighting alongside his employees to preserve the business amid the crisis and restrictions; an entrepreneur from São Paulo who decided to close his chain of gyms at the start of the pandemic because of the uncertainties; a student who financed law school in Buenos Aires dancing tango for tourists who no longer come; an actor who, after losing his job, added his bicycle to the orange tide of the Rappi App couriers in Bogotá and had two accidents.

These are four of the other victims of the coronavirus crisis in Latin America, those caused not only by the virus, but also by measures to face the health emergency. The region’s economies are in the ICU: the brake on daily consumption, the closing of borders, and the decline in global tourism are leading millions of Latin Americans into unemployment statistics, or have made their jobs even more uncertain.

Given the room for action afforded by the late onset of the pandemic, many governments were quick to implement measures to prevent the collapse of their hospital networks. But the figures show that this profoundly and immediately affected traditional labor dynamics, particularly in large urban centers.

Unlike in Europe and the wealthier Asian countries, both contagion and quarantine in Latin America occur in a high vulnerability context. A study by the state-owned Banco de la República in Colombia estimates that two-thirds of job losses in the country can be attributed “to the impact of the spread of the disease and the negative aggregate shock the economy suffered,” while the remaining third would be the result of restrictions. And in a region with high poverty rates and labor informality, the majority of the population is left outside social safety nets.

Colombian economist and former minister José Antonio Ocampo already speaks of a potential “lost decade” for Latin America, adding the effects of the coronavirus crisis to the preceding five years of poor growth, a period of regression in the reduction in poverty recorded at the start of the past decade.

According to him, the solution will be for governments to invest more in public spending. “There must be more spending on health, support for poor and vulnerable homes and employment. And it will be necessary to have a policy to support small businesses through employment subsidies or credit from development banks that will enable them to capitalize during the reactivation,” he adds.

But in the short term, and with Latin America still the epicenter of the pandemic, the debate on how the economy can operate on a daily basis while the population coexists with the virus becomes critical. The question is what are the ideal measures, so that each place minimizes both contagion and its impact on the lives of millions of people. The answer must necessarily involve listening to the accounts of workers and entrepreneurs trying to survive during the crisis. Here are four of them.

The restaurants being intubated by the coronavirus

Carlos Weinberger lives in uncertainty, unaware of what tomorrow will be like. Sitting in a chair on the empty terrace of the ‘Entrevero’, one of the four restaurants his family runs in Mexico City, this 60-year-old Uruguayan businessman, who came to Mexico as an exile in 1976, says that crises are no stranger to Latin Americans, who have learned to live with the economy’s highs and lows. “But this time it is much more complex. We must add the humanitarian crisis,” he warns. “It’s a total uncertainty about the future as we don’t know when this will change, when a normal income will come back with which we can all survive: the restaurant owners, the employees, whoever rents the property… Anyway, the economy in general.”

After over three months closed to the public because of the coronavirus, his restaurants reopened in July, when Mexico City implemented the orange stoplight that allowed the establishments serving food to operate at 30 percent of their capacity, up to a maximum of 10 PM, and occupancy of no more than four people per table. These restrictions, coupled with customers’ fear of being infected by eating out and reduced consumption capacity due to the crisis, meant that his business yielded only 15 to 35 percent of his pre-pandemic turnover.

The ‘Entrevero’ is located in a privileged area opposite the picturesque Coyoacán square, which is now isolated with yellow ribbons to prevent people from walking among the trees or sitting on the benches. With hardly any passers-by there are no customers, but business expenses are fixed, such as rentals and taxes. “At the government level there is zero support. They keep collecting all taxes. If we don’t pay, they come down on us. They charge interest, fines… There’s no interest in working people and small businesses like these, which generate labor,” he laments.

Before the crisis, his four restaurants had almost 120 employees. None were fired, but at least ten went after another source of income. For those who stay, the job is completely different from before the pandemic. Chefs, waiters and cleaners are divided into two shifts working on alternate days. As they close on Mondays, the working week is reduced to three days, and they have to survive with less than half of what was earned before the pandemic. “Income has dropped by about 60 percent,” says José Luis Espinosa Soberanes, a 30-year-old who paid for his communications college studies with what he earned by cleaning the restaurant. “Now what I earn here is what I continue to pay at home, but in the academic field it will affect me. I couldn’t buy books.”

Mexico’s National Chamber of the Catering Industry estimated that one in four restaurants could close due to the impact of the pandemic, a major blow to a sector that employed 2.1 million people in the country before this crisis. “We are in agony, and many of us may end up dying,” said Carlos Weinberger. He assures that all the other restaurant owners he talks to are in the same situation. “They’re intubating us, and we’ll see how many come out alive, more or less like with the coronavirus.”

From actor and producer to the insecurity of Rappi

When the pandemic began, Diego Barceló joined the orange tide that swept through the streets of Bogotá, emptied of people. He was yet another courier who made his living in Colombia delivering food to the homes of those who could afford to be confined – a luxury these days. An actor by profession and audiovisual producer, he had returned in April from Ecuador, where he filmed a short movie. He returned determined to pay off some debts and revive his dream of acting in the United States, but was caught up in quarantine and professional uncertainty. “I decided to launch the Rappi App I had for a while and got a bike to work,” he says, lying on a bed with his right leg shattered by an accident. He worked from 9 AM to 11 PM, from Sunday to Sunday, and, of course, “he made good money,” he concedes: 400,000 Colombian pesos a week, R$570, but with no kind of labor contract.

His story is the same as that of thousands of people who have joined the unemployment line in recent months. In June, the unemployment rate in Colombia stood at 19.8 percent, almost 2.2 million more people than that same month in 2019. And many who lost their jobs were eventually recruited by home delivery platforms. According to Rappi, before the pandemic the company had 20,000 couriers, and during the quarantine months another 30,000 started delivering.

The Covid-19 crisis revealed the significance of “undervalued work” which, with the confinement, “highlighted its indispensable role in the sustainability of the economic system,” according to a study by the Friedrich Ebert Stiftung Colombia Fescol Foundation, which alerts to the lack of protection for labor rights. Barceló and his colleagues experience this on a daily basis. As they are not employed by the platform, they have no health plan in full pandemic. A survey by the Labor Observatory of the Universidad del Rosario (Bogotá) found that in 2019, 53.9 percent of Rappi couriers were not covered by public health insurance and over 91 percent were not covered against work-related accidents.

This is the actor’s case. In June, he had an accident while carrying an order and, despite asking the platform for help, he says they did not dispatch him an ambulance. The most painful aspect, he says, is that the company claimed he was not carrying anything when the accident occurred. Pressed by the need for work, a few days later he came back and suffered yet another accident, even worse. He was run over by a motorcycle, fractured his right leg and was hit in the nose, which now needs surgery. “The App? Nothing, they say we have Labor Risk Administrators (ARLs) and that it covers a disability, but they pay for it after 60 days. And what do I do during this time unable to move for work?” he asks. “They take between 3,000 and 6,000 pesos (between R$5 and R$10) from us saying it’s for accident insurance, so when it happened I called, and the surprise is that according to them, there’s no such thing.” Rappi claims that the case is under study and that people connect and disconnect from the platform. “They are not App employees but whoever provides the service is covered by an accident insurance policy,” the company says.

The lack of clarity regarding labor risks is even more serious in the pandemic context. According to Colombia’s National Institute of Health, at least 705 couriers, loaders and messengers have been infected with the coronavirus. Despite these difficulties, Barceló says he does not regret the job. “I had no choice. With the world of culture stagnant, that was my only means of subsistence. But they take advantage of this need.” Now, he has sued the platform. He expects them to now answer him, although so far they have only called him informally with an apology.

Goodbye crossfit: the coronavirus ravages small businesses

The pandemic was cruel to small businesses in Brazil, and at least half a million companies closed their doors in June because of the radical changes imposed by the virus. A report by the Brazilian Institute of Geography and Statistics (IBGE) shows that almost 520,000 companies with fewer than 50 employees were unable to withstand the uncertainty of Covid-19. Over four months after the first case of the coronavirus in Latin America was detected in São Paulo, the disease has left more than 108,000 dead among a total population of 211 million.

Tiago Zarrattin’s crossfit gym, called Haddock Cross, was one of the pandemic’s economic victims. From the start, this 37-year-old entrepreneur experienced confinement in the city with anguish, as it left the streets empty. “The lack of a future, of knowing what will happen with this kind of commercial activity weighed heavily. It’s all undefined,” he reflects, justifying his decision to close the enterprise. The gym was located in Jardins, a upper-middle class neighborhood, two blocks from Paulista Avenue. “It’s a place where 80 percent of the public come from companies, which have reduced their operations and turned to home office. This caused a total change of scenario for the gym,” he laments.

Faced with uncertainty, he chose to protect his savings while considering what to do in the future. “My idea is not to spend too much and to be patient in choosing the best option when we get some perspective again,” Zarrattin says. His wife, an attorney, retained her job despite the economic crisis. “I believe people will return to their group activities, but outdoors or over the Internet. It may be that cross training will be reactivated in some open space,” he says.

The Central Bank projected a 9.1 percent drop in economic activity in Brazil between April and June compared to the same quarter last year. The blow was ruthless for companies that relied on the presence of customers, such as Haddock Cross, but also for companies that were already struggling before the coronavirus. According to the IBGE report, 795,000 small-sized companies crashed this year for reasons unrelated to Covid-19.

With the pandemic stabilizing in some cities like São Paulo (10,625 deaths for 12 million people by Monday), life is starting to return to normal. Commercial establishments in São Paulo have already reopened, although with reduced schedules and extra care to avoid contagion. Zarrattin hopes that, after being confined to their homes, people will feel like going back to the gym in the future. “I still have to wait to see how the public will react. Basically, everyone will restart their physical activity,” he says. “But if there’s an outbreak of Covid-19 at the gym, how will it be? We can’t risk anything now.”

Tango and tourism, in quarantine

María Emilia García Márquez stopped dancing tango in the streets of Buenos Aires a week before the Argentinian government decreed mandatory quarantine due to the Covid-19 pandemic. “I decided to protect myself because many tourists were coming, and the news was about everything that was beginning to happen in Spain and Italy,” recalls this 28-year-old dancer about the uncertainty that reigned in Argentina in mid-March, when the first local cases of coronavirus were diagnosed, all imported from Europe. The milongas, as the places where tango is danced are known, decided to close as well, given the great flow of people and the close contact between them.

“We didn’t know we’d spend so long stagnant. I thought it would be two months, and during that time I got by with what I have, but it was much longer,” laments García Márquez. First she dedicated her time to studying law, a degree she intends to complete next year, but as the quarantine was prolonged and her savings were depleted she began to look for temporary jobs that she could do without leaving home. “I thought about starting cooking homemade pasta, but I gave up because it has nothing to do with what I’m studying or my work,” she says. “I did some legal assistance because I’m not an attorney yet, thanks to an acquaintance from Puerto Rico who I represent and work for,” she adds.

She has also tried to teach tango lessons online, but has had little success, both inside and outside the country. “I’ve been talking to students from Mexico, but it seems they are even worse off there than here,” she says. In Argentina she taught a few classes, but she stopped insisting because the loss of purchasing power by the majority of the population, coupled with the oversupply of teachers, made this activity very difficult. Today, her most stable income is the monthly 10,000 pesos (R$740) she receives from the government for Emergency Family Income. She also thanks her roommate for keeping his job and this allows them to pay rent.

García Márquez sadly gazes at her collection of shoes and tango dresses, not knowing when she will be able to wear them again in front of the crowd that used to applaud her daily. She believes that the pandemic has made it clear that the rhythm of the 2×4, one of the main tourist attractions in Buenos Aires, conceals great precariousness. “Many people who worked in tango houses are unemployed. We are complaining about the sector’s invisibility and the lack of aid,” she concludes.

Source: El País