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In the midst of the pandemic, the fortune of billionaires in Latin America grows exponentially

By Lucas Leiroz | August 6, 2020

Even with COVID-19 spreading and the economic crisis growing, a new billionaire appears every two weeks in Latin America (new global epicenter of the pandemic) and the net worth of already existing billionaires increases exponentially. Interestingly, the phenomenon occurs as the pandemic strikes the region, with an evident relationship between the two cases, which, in fact, represents no novelty in the history of the economic development of nations.

In recent decades, the simultaneity of these phenomena has made their causal relationship explicit: the more billionaires, the more miserable. From 2008 to 2014, during the great financial crisis that hit the globe, the number of billionaires almost doubled worldwide. In contrast, the number of people who have entered extreme poverty has also increased exponentially over the same period, with millions of people living under miserable conditions. It seems that we are about to see history repeating itself.

According to data from the International Monetary Fund (IMF) and the Economic Commission for Latin America and the Caribbean (ECLAC), in 2020, there will be a drop of more than 9% in the Gross Domestic Product (GDP) of Latin America, which represents almost double the global average and the biggest drop in a century. As a result, ECLAC estimates that, by the end of 2020, there will be more than 44 million unemployed – 18 million more than in 2019 – in the region and a number of 52 million people will enter extreme poverty (16 million more compared to last year), totaling 83.4 million people in conditions of poverty.

There are currently 73 billionaires in Latin America, according to the Billionaires List and Real-Time Billionaires rankings presented by Forbes magazine. Eight new names appeared among the wealthiest Latin Americans from March to July 2020, notes the international organization Oxfam. Similarly, in Brazil, whose GDP decline is expected to be between 9.1% and 9.2%, according to the IMF and ECLAC, respectively. The 42 billionaires that exist in the country increased their net worth by $123 billion in March to $ 157 billion in July, according to Oxfam.

Still, Chile has seven billionaires whose assets grew by about 27% in the same period and reached a total of US $ 26.7 billion. In contrast, Chilean GDP will fall 7.9% according to ECLAC projections, which means an increase in poverty of 15.5% in 2020, 5.7% more than 2019.

In total, Oxfam estimates that $113.4 billion in tax revenue will be lost in Latin America in 2020, equivalent to 59% of public health spending in the region. In practice, Latin American billionaires are experiencing a daily profit of about $413 million, according to Oxfam data. The organization emphasized the case of Peru, where the COVID-19 pandemic has left 2.3 million people out of work in Lima since March. While more than 70% of the population works informally, without social protection or job security, the two richest people in the country have seen their fortunes grow by 6% (US $ 5.5 billion), in addition to the other two Peruvians who have reached the status of billionaires.

In fact, the pandemic is profoundly worsening the situation of social inequality in Latin America and increasing the economic gap on the continent. The wave of neoliberal governments that hit the region tends to worsen the scenario, remaining silent as entire nations are divided between billionaires and miserable. The simplest solution to this problem would be to increase taxation on large assets, so that the money of the billionaires, reaching public coffers, would be reverted to income distribution and social inclusion policies, aiming at progressively extinguishing poverty and balancing society with the insertion of the population in the middle classes. This, however, is not in the interest of most Latin American governments today.

A “positive” point of the crisis is perhaps to make clear the inability of the neoliberal model to face the main problems of the contemporary world. By the very logic in which this model operates, it becomes impossible to reverse the wealth of billionaires in social improvements to alleviate the suffering of the poorest. It is a model in which the rich only get richer and the poor only get poorer. Billionaires maintain passive wealth, participating in speculative and unproductive bets, increasing their assets in activities without any social function. In these times of crisis, when the population is the first affected by the decrease in available jobs, the social abyss only tends to widen: the longer the period of social isolation, the fewer jobs available, the more people in poverty, the more small and medium-sized companies failing and increasing the monopoly of large corporations and, consequently, more money accumulated by billionaires.

The only solution is to tax the wealth of billionaires, reversing their fortunes in social works. Otherwise, Latin America will live in chaotic times.

Lucas Leiroz is a research fellow in international law at the Federal University of Rio de Janeiro.

August 6, 2020 - Posted by | Economics |

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