First, we hope everyone is safe, and for those who’s health is affected by the coronavirus, please accept our words of support and solidarity.
While the healthcare and sanitarian experts struggle around the globe, with governments, to deal with this pandemic (South Korea has a lot to teach us on how to tackle this unfortunate situation), it is inevitable to turn our eyes to the economy. The securities markets find no floor or base of support, despite aggressive intervention measures by the FED and Central Banks. Big industries, like airlines, are already floating numbers of how much investments they need to prevent a collapse, at the range of 50 billion dollars.
However, the biggest challenge facing the inevitable social distancing, quarantines, and eventually stricter curfews that are evolving as we navigate the pandemic crisis, is how to address the economic stress this puts on small businesses and families dependent on those jobs. The financial resilience of this vital segment of our economy (the backbone, as we see it) is limited. Small businesses (restaurants, services, and retail) truly depend on the regular traffic of people. Therefore, policymakers must turn their attention to middle and working-class people, usually subject to limited saving and emergency funds, whose employment is dependent on small businesses. In fact, some estimates forecast unemployment at levels of 20% in the US as the pandemic crisis continues. President Macron in France had a coherent response to address this problem. The US economy is expecting more definitions from the Trump administration, as Congress is considering and passing to redress the economic impact of regular citizens. This Wednesday, President Trump signed into law a bipartisan coronavirus relief package that includes provisions for free testing for COVID-19 and paid emergency leave. Meanwhile, the White House is working with Congressional leaders on a package that could inject up to one trillion dollars of stimulus into the US economy, including direct $1,000 checks to aid citizens during the crisis.
On this issue, the Progressive Policy Institute presented interesting ideas, which center on support for the working and middle class, as well for small businesses. Their proposal focuses on expanding unemployment insurance, creating a safety net for vulnerable Americans, providing liquidity to cash-strapped people and businesses, relieving pressure on State and Local Governments with federal support, committing financial strategies to long-term investments, and cutting taxes on consumption instead of payrolls. We will add that, in the long term investment plan, it should be a priority expanding healthcare infrastructure and capacity building to deal with contagious diseases and pandemics.
In the meantime, another issue has surfaced amid the crisis. The COVID-19 pandemic could impact fragile and extremely vulnerable countries to a larger extent. Venezuela, which has become the epicenter of perhaps the most massive refugee crisis in history, is especially unsafe given the humanitarian crisis triggered by the economic incompetence of its oppressive regime over the past two decades. 5 million people have fled Venezuela over the past few years, with more than 2 million migrating to Colombia in less than two years. With a weak healthcare system, there is a need for an appropriate response from the international community. That would require putting aside the political conflict and stalemate the country is under, torn between the “de facto” dictatorial regime of Nicolas Maduro, and the President of the National Assembly Juan Guaidó, who is recognized as interim President by more than 50 countries, including the United States.
Some people, including world-renowned Harvard economist Jeffrey Sachs, argue that, given the current crisis, the US must lift sanctions on Venezuela, Iran, and Cuba. On the other hand, other expert voices like Frank Mora (former Deputy Assistant Secretary of Defense for the Western Hemisphere under President Obama, and Director of the Kimberly Green Latin American and Caribbean Center) believe that sanctions could be continued and used to incentivize changes in Venezuela’s regime through negotiated transitional steps to democratize the country while implementing programs of humanitarian assistance (to redress the coronavirus pandemic) funded and managed by the UN and international organizations. As the debate develops, the country’s oil-dependent economy conditions worsen with oil prices hitting less than 25 dollars per barrel; and the IMF responded that financial assistance in the tenor of 5 billion dollars requested by the Maduro regime could not be approved given that, literally: “…IMF engagement with member countries is predicated on official government recognition by the international community, as reflected in the IMF’s membership. There is no clarity on recognition at this time.”
Of course, to articulate an immediate internationally-managed cooperation response in the case of Venezuela, both sides of the political conflict would have to come to terms in a truce, facilitating aid and relief to come to the rescue of a nation that is very vulnerable to the pandemic as it makes progress into its territory like elsewhere in the world.