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UN warns of impending debt crisis in Latin America

November 30, 2020

The Secretary General of the United Nations (UN), Antonio Guterres, warned Monday that Latin America could suffer in 2021 a crisis of sovereign debt due to the expenses necessary to face the Covid-19 pandemic.

“A possible major sovereign debt crisis is looming next year,” Guterres warned in a speech during a virtual summit with Central American heads of state and governments.

The meeting was organized by the Central American Integration System (SICA) and its general secretary, Vinicio Cerezo, participated in it. The bloc is comprised of Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic.

According to Guterres, the impact of the new coronavirus pandemic “will significantly widen the financing gap” in Latin America and the Caribbean, which could lead to “a major liquidity crisis” — that is, lack of money for the economy to continue its usual pace.

The UN Secretary General appealed for the support of multilateral financial entities such as the International Monetary Fund (IMF) and the World Bank (WB), as well as the countries of the Group of Twenty (G20).

One of the measures that Guterres asked is that these organizations agree to delay the collection of the debt until the end of 2021.

The main objective of this initiative is to allow poorer countries the opportunity to concentrate their resources on fighting the pandemic and protecting the lives and livelihoods of their most vulnerable populations, according to the World Bank.

Guterres also called on the IMF, the World Bank and the G20 to “consider the possibility of granting greater relief, including debt cancellations,” to Latin American countries, including middle-income ones.

Central America and climate change

The president of Honduras, Juan Orlando Hernández, assured on Twitter that, during the meeting, he asked Guterres to recognize Central America as “the region most affected by the effects of climate change” given the recurring damage it suffers from natural phenomena.

For its part, the government of Guatemala reported that President Alejandro Giammattei and his peers raised the possibility of accessing the Green Climate Fund to rebuild the areas hit by hurricanes Eta and Iota, which left some 200 dead and millions in losses in the region.

Designed to be a financing mechanism for the United Nations Framework Convention on Climate Change (UNFCCC), the Green Fund was created to support the efforts of developing countries to limit or reduce their emissions and help them adapt to the effects of climate change.

In the same vein, the president of Costa Rica, Carlos Alvarado, urged Central America to form a united front to seek financing in order to help the region’s countries avoid a “health, economic and climate crisis.”

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