"14 Latin American Countries Request Emergency IMF Bailout...Worst Economy Expected in 50 Years"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Fourteen countries in Latin America and the Caribbean, where the novel coronavirus infection (COVID-19) began spreading late, have reportedly requested emergency bailout funds from the International Monetary Fund (IMF).

On the 5th (local time), Alejandro Werner, IMF Western Hemisphere Department Director, told major foreign media, "The world has never seen such a severe recession occurring simultaneously everywhere. Latin American countries are expected to record the worst economic growth rates in 50 years," conveying this information.

The spread of COVID-19 in Latin America was somewhat delayed compared to Asia, the United States, and Europe. The first confirmed case in Brazil was on February 25, and the first COVID-19 death in Argentina occurred on the 7th of last month. Considering that Asia, including China, experienced rapid spread in January and February, and Europe in February and March, the outbreak in Latin America occurred relatively late. Werner explained that as markets in the U.S., Europe, and Asia were severely shaken, Latin American countries were already experiencing a complex shock from falling commodity prices, oil prices, and capital outflows before the COVID-19 spread, making them particularly exposed to economic damage compared to other countries.

Werner stated that the 14 Latin American countries applied for a total of $4.48 billion (about 5.5 trillion KRW) in emergency bailout funds from the IMF but did not specify which countries these were. He noted that the IMF previously had a lending capacity of $1 trillion and is supporting countries needing funds to respond to COVID-19. According to the requests received so far, the IMF still has lending capacity without Special Drawing Rights (SDR).

Latin American countries, which had been struggling economically even before COVID-19, are now in an even more difficult situation due to this crisis. Credit rating agencies have recently downgraded the credit ratings of Latin American countries. Moody's lowered Argentina's sovereign credit rating by two notches from Caa2 to Ca on the 3rd. This is one notch above the default-level lowest C rating. S&P downgraded Mexico's credit rating from BBB+ to BBB on the 26th of last month and revised the rating outlook from 'stable' to 'negative.' Notably, some Latin American countries, such as Mexico and Ecuador, are oil-producing nations, and they are suffering significant impacts from the recent oil price war between Saudi Arabia and Russia.

According to Johns Hopkins University in the United States, the number of confirmed cases in Brazil on this day was 11,254, ranking 16th worldwide, with Ecuador at 3,636, Peru at 2,281, Mexico at 1,801, Argentina at 1,554, and Colombia at 1,485.