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CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
1
COVID-19, sustainable development
challenges of Latin America and the
Caribbean, and the potential engines for an
SDGs-based recovery
Authors:
Maria Alejandra Gonzalez-Perez*
Professor of Management, Universidad EAFIT, Colombia
Email: mgonza40@eafit.edu.co
Mahmoud Mohieldin
United Nations’ Special Envoy on Financing 2030 Agenda for Sustainable Development
Email: mahmoud.mohieldin@un.org
G. Tomas M. Hult
Professor of International Business, Michigan State University, USA;
and affiliated faculty at Leeds University (UK) and Uppsala University (Sweden)
Email: Hult@broad.msu.edu
Juan Velez-Ocampo
Assistant Professor of Management and MBA Academic Coordinator,
Universidad de Antioquia, Colombia;
Email: juan.velez28@udea.edu.co
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
2
Abstract
Purpose: the purpose of this manuscript is to examine the impact of COVID-19 on the Latin
America and the Caribbean region and to discuss imperative engines for potential regional
recovery.
Design/methodology/approach: this study conceptually discusses the effects of COVID-19
on the Latin American and the Caribbean region and highlights potential areas for recovery.
Findings: the Latin American and Caribbean (LAC) region have a history of facing structural
development challenges – due to digital inequality, environmental degradation, erosion of
democracy, and financial debt – which have led to a profound discontent among people in
the LAC region, and this dissatisfaction has been intensified by the crises stemming from the
COVID-19 pandemic. LAC region can increase its resilience and recover its path to
sustainable development by consolidating impact-based regional value chains, attracting
sustainability-themed Foreign Direct Investment (FDI), and nurturing structural development
to facilitate LAC companies to expand into international markets (“multilatinas”).
Originality: the LAC COVID-19 crisis recovery requires shared responsibility, global
solidarity, urgent and immediate cooperation, and structural transformations to enable deeper
regional integration. This integration should focus on impact-based value chains to be
resiliently adaptable to changing global realities and arduous local contexts. This manuscript
provides integrative avenues for potential regional recovery within the region.
Research implications/limitations: there are some preliminary studies on the economic and
social impact of COVID-19 on the LAC region, however, the strategies that emerging and
developing economies might pursue to promptly recover are still a matter of discussion. The
uncertainty and heterogeneity of the developing and emerging economies, and the
multidimensional needed actions require local adaptations and adjustments.
Keywords
COVID-19; Latin America and the Caribbean; SDGs-based recovery; regional value chains;
sustainable recovery; digital inequality; climate change; financial debt.
Article classification: conceptual paper.
Introduction
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
3
Political, social, economic, and environmental crises have been ingrained in the fabric
and part of operations in the Latin America and the Caribbean (LAC) region for more than a
century. For example, political crisis in the LAC region has involved corruption, guerrilla
activities, dictatorships, coups d'état, civil insurgency, political polarization, and nationalism.
Social unrest has been taken place via forced displacement, terrorism, crime, inequality,
strikes, protests, violence against women, and land-own concentration. Some of the more
serious economic predicaments in the region include unemployment, informality, and low
productivity, while environmental crisis often centers on deforestation, air pollution,
earthquakes, hurricanes, droughts, volcanoes, and floods. Taken together, these enduring
crises – more or less pronounced depending on time period – have created a fragile
foundation for the LAC region and an immense structural development challenge in terms of
emerging from the COVID-19 pandemic.
1
Positively, the Latin America and the Caribbean region has resiliently survived
sequences and sets of crises of various depths and complexities (Azevedo et al., 2020).
Resilience has been defined by the United Nations Department for Disaster Risk Reduction
(UNDRR) as “the ability of a system, community or society exposed to hazards to resist,
absorb, accommodate, adapt to, transform and recover from the effects of a hazard in a timely
and efficient manner” (United Nations, 2016). As such, the LAC region has created an
international business ecosystem of resilience that is unique to the diverse countries and
territories in the region. This uniqueness has resulted in both advantages for the members of
1
As a note for clarity, the official scientific name of the coronavirus that caused the global
pandemic is SARS-CoV-2 and the disease itself is called COVID-19. We use COVID-19 in
this paper as a “phrase” representing the terms coronavirus, SARS-CoV-2, and COVID-19.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
4
the LAC region related to surviving ongoing crises as well as disadvantages related to solving
structural catastrophes such as COVID-19. Basically, from a short-term perspective, the LAC
region presents a heterogeneous approach to dealing with the pandemic that results from a
varied state capacity, analytical capabilities, and pre-existing complex scenarios like the
social unrest preceding the pandemic (Gonzalez-Bustamante, 2021). While, the long-term
recovery of the region is highly dependent on the political, social, economic, and
environmental flexibility, stability, and redundancy mechanisms that regional actors put
together to effectively handle all aspects of the COVID-19 pandemic.
Consequently, the Latin America and the Caribbean region is possibly facing the
worst of its crises in recent memory with COVID-19, and the pandemic is having dreadful
political, social, economic, and environmental impact on the region. As expected, the
immediate health implications are immense and the long-term health consequences are
difficult to anticipate. Beyond health issues and the alteration of accepted social dynamics,
at least in the short-term, COVID-19 has resulted in closure of more than 2.7 million formal
enterprises and a loss of 8.5 million jobs, mainly in small and medium-sized enterprises
across the region (Economic Commission for Latin America and the Caribbean, ECLAC,
2020c). Unaccounted for are also the many family-owned businesses that formally do not
register as companies within the LAC region that have been closed or at least been severely
affected by COVID-19. In effect, the economics related to the confinement of people and
movement and the social distancing that have been part of the arsenal to contain the virus
have slowed and, in many cases, completely disrupted production, investment, and trade in
most economic sectors in Latin America and the Caribbean (ECLAC, 2020b).
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
5
COVID-19 for the Latin America and the Caribbean region has resulted in a complex
intersection of several crises that are already being staged and have become more visible. For
example, by February 2020, distrust in democratically elected leaders and the perceived
inability of governments to confront the exclusion of many of the social and economic
dynamics had led to accumulated and profound discontents. This heightened discontent was
already manifested strongly in several countries in the LAC region, where social protests had
been consolidating demonstrations against governments since October 2019. Additionally,
the 2019 social protest movement in Hong Kong, Beirut, Paris, and Barcelona also took place
in major cities in the Latin American and Caribbean countries (e.g., Chile, Ecuador, Bolivia,
Colombia, Haiti, Venezuela, and Nicaragua – Phillips, 2019; Ramos, 2019; Romero, 2019).
Although each social protest is different, the wave of global protests, led by young people
and spread online, were implemented using common tactics, symbols, anthems, and slogans
that reflected rejection of inequality and corruption by the elites (Hegarty, 2019). As such,
the global social protests combined with ongoing crises in the LAC region escalated when
COVID-19 broke out, significantly worsening the structural development challenges for the
region. For example, by the beginning of 2020, before the outbreak of COVID-19 in the LAC
region, social marches by raged protesters clamoring for social, economic and environmental
justice with both peaceful and armed clashes had cost not only lives and injuries but also
severe disruptions in trade and productive activities (Salinas Maldonado, 2020).
However, the COVID-19 outbreak found the LAC region amid deteriorating
economic growth, higher levels of inequality, and a larger percentage of the population being
in the vulnerable category. Before the COVID-19 pandemic, the LAC region had 215 million
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
6
poor people, and by the end of 2020 this figure is expected to be 231 million (ECLAC,
2020d). However, as is the case throughout the world, every person and every company in
the LAC region has been severely affected by the COVID-19 restrictions.
This manuscript aims to analyze the impact of COVID-19 on the LAC region and
discuss potential mechanisms for an SDG-based regional recovery. This article is organized
as follows: in the next section, we explore the economic consequences of COVID-19 on the
LAC region. The following section discusses four main unsolved elements that could
accentuate the impediments for recovering: digital inequality, environmental crisis, political
unrest, and debt crisis. Thereafter, we introduce and analyze three engines for potential
regional recovery: consolidation of impact-based regional value chains, attracting
sustainability-themed foreign direct investment (FDI), and strengthening multilatinas and the
LAC region’s private sector. Finally, we draw conclusions and highlight the need to boost
multi-actor, human-centered recovery attempts.
Effects of COVID-19 on the LAC region
The Economic Commission for Latin America and the Caribbean (ECLAC, 2020a)
estimates that in 2020, the LAC countries will have a contraction of 5.3 percent of their
collective Gross Domestic Product (GDP). What is perhaps worse, the region also expects a
setback of 13 years in the loss of progress in declining poverty and social development. For
its part, the International Monetary Fund (IMF) warns of the threat of even deeper and more
significant social unrest, with the potential for the region to have a contraction of almost
double what the ECLAC estimates. IMF forecasts a scenario that may result in contraction
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
7
in the region of -9.4 percent (IMF, 2020b). Either way, a 5 to 10 percent contraction and
setback of 13 years in poverty and social development would be more devastating for the
LAC region than almost any other area in the world (with the exception of Africa).
The direct effect of the COVID-19 containment-lockdowns and the spillover effect
on FDI and trade, for example, from the rest of the world have impacted remittances, tourism,
commodity prices, and capital outflows (Georgieva, 2020). The social and economic effects
of the COVID-19 crises will have a very pronounced effect on the most vulnerable (e.g.,
older adults, women, migrant workers, young people, low-wage workers), small and medium
enterprises, and those in the informal economy (e.g., family-owned small businesses).
Broadly, the COVID-19 pandemic has an impact on the LAC region via (e.g., ECLAC,
2020a, 2020b):
a. declining exports as a result of declining economic activity of trading partners.
b. falling commodity export prices and price war in the global oil market.
c. disruption of global production, value chains, and supply chains.
d. the collapse of demand for tourism and hospitality services.
e. lower demand for financial assets in LAC as a result of deteriorating financial
conditions and increased risk aversion by investors.
Within each of the categories of impact, both the formal and the informal economies
of the LAC region’s countries are affected. It is estimated that 58 percent of the economically
active population in the LAC region is engaged in informal activities (OECD, 2019). Two-
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
8
thirds of the population has no social protection, and their daily livelihood depends on the
day's activities. In the words of Angel Gurría (2020), Secretary-General of the OECD, “they
are people who must choose either the virus or hunger.” In the Caribbean countries, due their
high dependency in tourism (50 to 90 percent of GDP and employment) the consequences of
any crisis are even worse than the rest of the region (Georgieva, 2020), and the COVID-19
pandemic has escalated the political, social, economic, and environmental crises to markedly
new heights.
When comparing the COVID-19 pandemic and its effects on historical data for the
LAC region, the setback is significant and the way out of the treacherous condition is very
much uncertain. At the positive level, in the period 2000-2012, the LAC region had a positive
growth rate and poverty and inequality were also reduced. Outward foreign investment
figures from the LAC countries were also robust (Aguilera et al., 2017). As shown in Figure
1, FDI inflows to Latin American and Caribbean countries peaked in 2011 (201 billion U.S.
dollars). Except for the financial centers in the Caribbean countries, Brazil, Mexico,
Argentina, Colombia, Peru, and Chile have been the largest recipients of inward FDI in the
past decade. Even worse, at the beginning of 2020, the LAC region had experienced six years
of economic stagnation. And, between 2010 and 2019, the regional GDP growth rate declined
from 6 percent to 0.1 percent (ECLAC, 2020a). More recently, in the period 2014 to 2019,
the LAC region had its lowest economic growth since the 1950s. Unfortunately, UNCTAD's
World Investment Report 2020 reported a significant drop by more than 50 percent in the
LAC region compared with the previous year, and 2021 is predicted to be even worse due to
COVID-19 strains on the economy.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
9
Figure 1: FDI flows in Latin America and the Caribbean (millions of U.S. dollars)
Data source: UNCTAD 2020(b)
In this context, the Latin American and Caribbean region faces four main “new”
development traps that have been heightened by the COVID-19 pandemic (e.g., OECD,
2019). These relate to:
a. production: low productivity and low participation by LAC organizations in global
value chains.
b. social vulnerability: some of the vulnerable middle class had been lifted out of
poverty, but now faces a volatile income situation and risks of falling into poverty.
c. institutional: institutions increasingly fail to respond to citizens' demands, resulting
in an increase in distrust which leads to citizens being reluctant to pay taxes; the
implication is lower tax revenues to finance social needs and demands.
d. environmental deterioration: environmental progress is affected by the intensive use
of natural resources by many LAC economies and the focus on COVID-19 issues.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
10
Complex societal problems in the LAC region
The outbreak of COVID-19 was first reported on December 31st, 2019, in Wuhan,
China, the World Health Organization (WHO) declared it a pandemic on March 11th, 2020.
In June 2020, the Latin American and Caribbean region became the epicenter of the pandemic
(after having its first confirmed public case on February 26th, 2020 in Brazil). There has been
a range of regulatory and social control measures taken in the LAC region for the purpose of
controlling infection rates, save lives, and mitigate the harmful impacts on the economy at
the national and municipality levels. But, despite innovative approaches by local and national
governments in the LAC region to respond to the COVID-19 pandemic (Vivas and Villar,
2020), social inequalities, political polarization, and other structural obstacles have limited
their responses (Ramírez de la Cruz et al., 2020).
Latin America and the Caribbean countries and territories make up a region with
broad social and political diversity. The LAC region has about 642 million inhabitants, 33
sovereign nations, and 15 dependent territories. In spite of the remarkable poverty reduction,
FDI attraction, and increased state capacity within the last two decades (Gonzalez-
Bustamante, 2021); there are unsolved elements that could deepen the obstacles for
recovering. For instance, Azevedo et al. (2020) identify inequality, environmental
degradation, and ineffective political systems that fail to fulfill societal expectations as the
most challenging issues the region is facing. Here we discuss these three obstacles and the
upcoming financial debt to provide a regional context for the mechanisms that we will later
discuss as stimuli for regional recovery.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
11
Digital inequality
One of the most problematic social issues in LAC is its high level of inequality, which
is closely associated to exclusion, crime, and corruption (Hall, et al. 2012). The region
devotes 12 percent of its GDP to public social spending, while the figure is 29 percent in the
average developed country (ECLAC, 2019). This inequality in the region is also visible in
the form of a digital divide among citizens, consumers, and companies. Although within the
last few years LAC countries have made important attempts to reduce the digital divide;
broadband internet connectivity is still less than 50%, which prevents online employment
opportunity and online education for millions of people, especially when they are most
needed because of lockdowns and jobs lost (Jaramillo, 2020)
Some authors have suggested that the close relationships between politicians and
business leaders in the region might affect the inequality reduction in LAC (Bremmer, 2009;
Hennart, et al., 2017), moreover, in a wicked problem situation as the one that the region is
facing, there is a need for leaders that are able to interact with different entities and
communities (Wagstaff et al., 2020). As a direct result of COVID-19, measures of
confinement and social distancing has led to accelerating the virtualization of economic,
social, and labor relations (ECLAC, 2020b), however, the region is still underprepared for a
digital inclusion that considers the needs of the most vulnerable. For the LAC region, this
mean accelerating robotics-enabled automation in investment-capable sectors as a measure
of continuity in the face of workers' quarantines, illnesses, and deaths. Adding to these grim
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
12
consequences, the digital divide increases the constraints for skills-based technological
change. Such uneven capabilities for digital transformation are likely to increase social and
economic inequalities.
Environmental degradation and climate crisis
The LAC region has 8 of the 17 countries on the planet considered to be megadiverse
- a term that refers to a nation that harbors a majority of Earth’s species -; however, there has
been a loss of 89 percent of these species since 1970 (Barcena et al., 2020). Between 1970
and 2019, the LAC region was hit by 2,309 natural disasters, causing 510,204 deaths, and the
losses and damages affected the lives of 297 million people (Barcena et al., 2020). Related
to COVID-19, Alicia Bárcena, Executive Secretary of the Economic Commission for Latin
America and the Caribbean (ECLAC) warns that: “We must be careful because
environmental standards are being relaxed. We don't afford this. We are facing a global
public ‘bad’ – the COVID-19 pandemic – but the next one will be the climate crisis. We must
build back better, and that means doing so with equality and sustainability.” A crisis often
results in a new, often innovative, way to analyze and respond to the next crisis. The LAC
region (and the world) has an opportunity to be more proactive, but environmental
degradation and climate issues cause friction among the LAC countries that spill over to
political, social, and economic constraints.
From a firm-level perspective, multilatinas, which are Latin American firms that have
engaged in value-added activities abroad (Cuervo-Cazurra, 2008), have been particularly
interested in engaging in sustainable practices and initiatives like the United Nations Global
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
13
Compact and the Sustainable Development Goals. These companies have managed to reduce
their legitimacy deficit by actively demonstrating their environmental commitment (Castaño
et al. 2020), moreover, emerging market firms use their internationalization and sustainability
practices to acquire credibility and legitimacy in international markets (Velez-Ocampo and
Gonzalez-Perez, 2019). However, in periods of crisis, the implementation of sustainable
solutions like lean manufacturing and additive manufacturing might not be prioritized
(Ghobadian et al. 2020). Moreover, although COVID-19 might encourage digitalization and
sustainable disruptions, the actual disruptive behavior is unevenly accepted and implemented
across industries (Wade, et al. 2020), especially in terms of technological solution to deal
with climate change, which may deepen inequalities between and nations (Diffenbaugh and
Burke, 2019).
Erosion of democracy, increased nationalism, and populist political polarizations
Another common issue within LAC countries is the different forms of political unrest.
Although most countries in the LAC region are currently in the most prolonged uninterrupted
period of democracy in their histories, the region is also experiencing public anger as a
response to persistent social inequality, poor governance, and state weakness (Levitsky,
2018). The result has been massive human migration flows in the last decade, mostly from
Venezuela, that have created nationalistic tension within and among the LAC countries. As
humans are the primary vector for COVID-19 transmission (WHO, 2020), xenophobic
manifestations have increased due to the outbreak of COVID-19.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
14
Consequently, political measures have been taken to prevent the movement of people
across borders at this time, leaving many foreign nationals unprotected. These democracy
and nationalistic issues relate to ideological struggles. For example, political, societal, and
business leaders in the LAC region aim to better understand if the United States is a better
partner than the People's Republic of China for the long-term (Ellis, 2018). Geographic
proximity, trade history, and financial investment over time suggest that the United States
should continue to be at the forefront of partnerships sought by LAC region members. Such
muddled ideological thinking and lack of logical structural development approaches render
the LAC region less than ready to respond to and emerge from the COVID-19 pandemic as
effectively as many of its worldwide counterparts.
The upcoming new debt crisis
In Latin America, the decade of 1980s was “characterized by debt accumulation,
external debt servicing problems, and debt restructuring” (Daniels et al., 2007: 29). However,
since the beginning of the 21st century and until 2017, countries in the LAC region
committed to reduce their debt levels and strengthen national reserves. By 2017, the LAC
region had achieved, for the first time in 30 years, an average annual economic growth of 5
percent (with the exception of 2009 when it dropped to 1.9 percent due to the global economic
crisis). Expectedly, though, 95 percent of the LAC countries are projected to face negative
per capita income growth in 2020 due to COVID-19. The International Monetary Fund (IMF)
projects a cumulative loss to the Latin American economy of about 1.2 trillion dollars
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
15
(Georgieva, 2020). This loss means the slowing, and in many cases reversing, of the efforts
toward poverty reduction.
According to the IMF (2020a), the LAC region will have a general government net
lending/borrowing of -6.6 percent of the regional GDP for 2020. To offset economic issues,
some governments in the LAC region offer tax relief and customization of credit guarantees
to support the reactivation and continuity of businesses (large and mostly SMEs).
Furthermore, governments are intervening to accelerate the recovery via deploying fiscal
measures to protect employment, protect the most vulnerable (via food programs, wage
subsidiaries), and strengthen their health systems (Georgieva, 2020). As expected, these
measures have a duality of cost (and debt) to the national governments, adding pressure to
public finances, but also facilitate economic viability of the LAC region’s people, companies,
and countries.
Additionally, different economic sectors in LAC region have been strongly led by
state-owned enterprises; which adds governance difficulties associated to the agency
problem, the financial support of the government, and the lack of incentives for improving
administrative capabilities (Hennart et al., 2017). These elements added to the pressures on
local governments to maintain labor during and after the pandemic might lead state-owned
enterprises to increase the external debt and compromise future survival. Interestingly,
previous debt crises in the LAC countries have provided some lessons that can be leveraged
to face the COVID-19 debt crisis (Flores Zendejas, 2020). As expected, the region’s capacity
to react and intervene to accelerate the recovery has been historically influenced by the
availability of funds and the rapid resolution of debt disputes.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
16
Imperative engines for potential regional recovery
Considering the ongoing effects of COVID-19 and the four challenging societal
problems in the LAC region that we have just outlined (digital inequality, environmental
degradation and climate crisis, political unrest, and upcoming debt crisis), we proceed to
discuss three mechanisms for potential regional recovery. Table I introduces these potential
solutions and their ties with SDGs.
Table I. Imperative engines for potential regional recovery
Potential solution
Key elements
Main related SDGs
Consolidating
shorter impact-
based regional
value chains
• Need to develop more flexible,
resilient, and shorter regional
value chains.
• Need to reappraise
participation in global value
chains and find/develop new
regional partners.
• Synergistic cooperation within
the LAC region to develop new
value chains.
• SDG-9: Industry,
innovation and
infrastructure.
• SDG-12:
Responsible
consumption and
production.
• SDG-17:
Partnership for the
goals.
Attracting
sustainability-
themed FDI
• Need to strengthen/adhere to
sustainable investment policies
and regulations and align
inward FDI to the region’s
objectives.
• Commitment of multiple
stakeholders towards the
implementation of sustainable
inward FDI policies and
practices.
• SDG-8: Decent
work and
economic growth.
• SDG-10: Reduced
inequalities.
• SDG-11:
Sustainable cities
and communities.
Strengthening
multilatinas and the
LAC region’s
private sector
• Opportunity to exploit
multilatinas’ ability to operate
under uncertain and turbulent
conditions to impulse regional
• SDG-9: Industry,
innovation and
infrastructure.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
17
economic recovery during and
after COVID-19.
• Combining efforts of multiple
stakeholders to support
economic recovery based on
sustainable practices.
• SDG-12:
Responsible
consumption and
production.
• SDG-17:
Partnership for the
goals.
Consolidating shorter impact-based regional value chains
The COVID-19 pandemic exposed the risks of supplier dependency, supplier
networks, viability of value chain partners, and virtually all modes of transportation avenues.
Due to disruption of global production, costly biosecurity provisions, regulatory non-tariff
barriers to cross-border movement of goods, and the need to be geographically closer to
consumers, it meant that the diversification of suppliers was deemed critical for business
survival in several sectors across the globe. Although there are sectorial differences, the
disruption of global production necessarily entails a transformation from global efficiency-
orchestrated value chains to more flexible, resilient, and shorter market-seeking regional
value chains (UNCTAD, 2020). However, developing these adaptive and nimble regional
value chains requires infrastructure investment, facilitative industrial policies, and regional
economic cooperation.
The world may have forgotten to a large extent in its quest to become more globally
efficient and synergistically integrated across country borders, but from the launch of
UNCTAD in 1964 the importance of regional commercial activity was recognized as critical
to overall structural development and economic prosperity in the whole world. In this context,
trade across country borders – via effective and efficient global supply chains embedded in
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
18
production-based global value chains – was an instrumental element in standards of living
and prosperity (UNCTAD, 1964: 7-8).
Consolidation of global value chains into new global value chains and/or regional
value chains – either due to politics or perhaps biosecurity – present an opportunity to the
LAC region. China may experience a reduction in global value chain partners, or at least have
to contend with an increase in alternative options elsewhere for companies (and countries) to
be able to create the expected redundancies in global value chain networks. Foreign
transnational corporations in China are likely to be diminished, manufacturing production in
China may be relocated, and these measures will undoubtedly result in restructuring global
value chains. The LAC region could benefit if its members can cooperate synergistically and
leverage the region’s inherent labor, production capabilities, and resources. Additionally,
despite the LAC region’s sometimes contentious relationship with the United States, the
proximity of several of the LAC countries to the U.S. (and considering that 10 of the countries
in the LAC region have bilateral free trade agreements with the U.S.) present a natural
opportunity for companies and countries in the LAC region to become critical nodes in the
restructured global value chain networks that are forming and being developed as a result of
the COVID-19 crisis.
At the outset of such strategic value-chain implementation, to benefit from the
potentially new configurations of global value chains and networks being developed,
countries and companies in the region need to identify the economic sectors and underlying
industries where they would have the best opportunities to compete and be inserted into
regional and global value chains. The existence of consolidated regional trade agreements
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
19
such as the Pacific Alliance, CARICOM, and Mercosur can serve as a platform for
implementation and an opportunity to reinvigorate value chains and economic recovery
among the LAC region’s countries and territories.
Attracting sustainability-themed FDI
Due to its natural resources, the LAC region has historically attracted foreign
investors, mostly in the extractive industries. UNCTAD (2020) places Latin America as one
of the regions most affected by falling investment, resulting from the collapse of supply,
demand, and anti-crisis policies, which will constrain the flow of capital. Within an
investment framework, to pay the financial debt and fund disaster response and crisis relief
programs to face the negative consequences of COVID-19, several LAC countries and
territories could be forced to sell shares of state-owned enterprises.
The LAC countries are also likely to have to provide foreign investors with
concessions to exploit national assets and strategic industries, a politically charged
ideological issue. Although these decisions, if politically possible to implement, might
provide the required capital, they imply profound trade-offs in both sovereignty for current
and next generations and transferring national specific advantages. To address these
concerns, countries must urgently mainstream the Sustainable Development Goals (SDGs)
in national investment policy frameworks. Furthermore, incorporating environmental, social,
and corporate governance (ESG) standards into the inward FDI policies, including the
investment promotion efforts, require the active participation of multiple stakeholders
(governments, private sector, international organizations, and local communities).
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
20
Strengthening Multilatinas and the LAC region’s private sector
From the 1940s until the 1980s, the LAC region was characterized by high
government interventions, import substitution models, and economic growth focused on
domestic markets. Until the 1980s, due to protectionist measures, such as severe restrictions
to inward FDI and substantial import limitations, companies in the LAC region faced little
competition in their region (Daniels et al., 2007). In the 1980s, the LAC region became more
favorable to FDI (Trevino et al., 2002).
In the period 1988 to 1999, market reforms led by economic openness and
liberalization brought challenges to domestic-based LAC companies, which resulted in these
companies having to upgrade their competitiveness and capabilities to compete with foreign
transnational companies both in their home countries and internationally (Cuervo-Cazurra,
2008; Santiso, 2013; Trevino et al., 2002). At this time, internationalization of Latin
American companies could be considered a defensive reaction to survive the fierce
competition with foreign MNEs (Casanova and Fraser, 2009; Casanova, 2010).
More recently, between 2009 and 2017, multilatinas became more integrated into the
international marketplace. These multilatinas invested about 48 trillion U.S. dollars in
mergers and acquisitions (M&A) during the recent decade, an amount equivalent to 20
percent of all M&A activities in the LAC region (Aguiar et al., 2018). Additionally, in the
period 2008 to 2016, multilatinas recorded an annual increase in profits three times the
average of large Latin American companies. Multilatinas are a critical part of emerging from
the COVID-19 pandemic within the LAC region and within each of its member states.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
21
For instance, the factors that enable multilatinas to perform better than that of non-
trading companies are (Aguiar et al., 2018):
a. more profound connection with consumers.
b. overcoming the complexities of global value chains and networks.
c. more investment in R&D and orchestration of innovation networks.
d. expertise in mergers and acquisitions.
e. employee development and continual improvement in knowledge and skills.
Nevertheless, multilatinas and other LAC companies also face challenges associated
with their emerging origin. For example, the unsophisticated internationalization networks,
lack of international managerial experience (Estrin et al. 2018), home country uncertainty,
corruption, political risk (Cuervo-Cazurra, et al. 2019), and a reputation and legitimacy
deficit when operating internationally (Vidaver-Cohen et al. 2015). At first sight, these
elements could be perceived as obstacles for conducting businesses and for dealing with the
challenges of COVID-19, however, there is empirical evidence pointing out that multilatinas
use wisely their experience working in uncertain regional contexts. For instance, research has
demonstrated that multilatinas operating in foreign markets have adopted the flag of
sustainability to build legitimacy, consolidate national and international reputation, and
enhance total shareholder return and total societal impact (Castaño et al., 2020).
Additionally, these companies have accumulated knowledge and developed
capabilities while surviving and thriving their local institutional environment, therefore,
multilatinas and other LAC companies could be better prepared to deal with complexities
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
22
and uncertainties (Aguilera et al. 2017). For multilatinas, internationalization is a driver in
the pursuit of sustainability initiatives and the SDGs (Sustainable Development Goals) are
drivers of long-term corporate strategy. Additionally, multinationals' financial performance
also depends on non-financial variables such as social and environmental considerations
related to companies' internationalization (Gomez-Trujillo and Gonzalez-Perez, 2020).
Conclusions
COVID-19 is a pandemic that is treated as a crisis in the international marketplace.
However, for the Latin America and Caribbean (LAC) region, COVID-19 represents an
intersection of several crises that have been worsened with the pandemic effects. The LAC
region cannot afford further deepening of these crises. The region is not prepared to forestall
the next crises: civil strives and violent turmoil, financial debt, and climate change. In fact,
emerging from the COVID-19 pandemic will be a long and burdensome process for all of
the LAC region’s countries and territories.
A way to emerge prosperous and viable is likely inherent in accelerating the United
Nations 2030 development agenda. Solving the short and long-term COVID-19 pandemic
requires immediate action (Amorós, 2020; Mohieldin and Kelleher, 2020). Focusing on an
SDG-based recovery strategy and strengthening commitments towards the 17 Sustainable
Development Goals is more important than ever to develop a robust platform and foundation
for the region’s future. Countries, companies, and local communities need to seize
opportunities for an inclusive and sustainable future. These efforts can be based on some
combination of low carbon emission, fairness in market dynamics, equality of opportunities
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
23
in which fewer people live in extreme poverty, climate-resiliency, commitment to narrow the
gap between the poor and the rich, gender equality, and protection of human rights (United
Nations, 2020a).
Climate change shocks should be mitigated via promotion of industrial transition and
cleaner energy. Debt sustainability must also remain in the development agenda (United
Nations, 2020b). Governments must do “all it takes to support those most affected by the
crisis,” said Kristalina Georgieva, Managing Director of the International Monetary Fund
(IMF), strongly recommending to governments to strive for effective public policy
interventions and to ensure the accountability of pandemic-related expenditures (Georgieva,
2020).
Economic recovery can be accelerated by the involvement of private creditors and
governments from capital-exporting countries. As such, rapid action to debt disputes,
international cooperation, and well-coordinated mechanisms are critical to the emergence
from COVID-19 in a financially viable way that can be long-lasting (Flores Zendejas, 2020).
Additionally, a comprehensive and coordinated multilateral response is needed within and
across countries and territories (United Nations, 2020a). Protecting livelihoods and the real
economy (formal and informal economies) also means that monetary and fiscal responses
need to be developed “to ensure that the burden does not fall on those countries who can least
bear it” (United Nations, 2020: 1).
Although a solidarity-based and a human-centered approach is required, international
markets have an essential role in providing incentives for the SDG-based recovery in the
LAC region. Hult et al. (2018) demonstrated that when costs and prices are market-
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
24
competitive, company initiatives contributing to sustainable development have a positive and
significant effect on performance of these companies and consequently on the countries in
which they reside.
The learning here is that sustainability can be helpful in COVID-19 recovery efforts
and policymakers should persist in connecting welfare policies with competitive markets
(compare with the policies often highlighted in Sweden). A myriad of options exists. Tax
relief to prevent bankruptcies and massive job losses, incentives to spur business, wage
subsidies, adjustments to loan terms and credit guarantees, crisis relief projects, cash
transfers, and poverty and COVID-19 alleviation social programs can provide possibilities
for the survival of people, companies, and countries. Such programs can facilitate progress
in communities that stimulate a return to “normal” supply and demand.
Multi-actor engagement platforms such as the U.N. Global Compact could serve as a
mechanism to enhance the participation of the private sector and community actors in impact-
based recovery for the LAC region. Coordinated regional, national, and subnational
approaches could enable lessons and best practice sharing (United Nations, 2020a). These
coordinated efforts will include global solidarity, shared responsibility, multilateral
assistance, international cooperation, and local multi-actor engagement as imperatives for
achieving short and long-term sustainable recovery. To invest in human capital and to
educate people regarding cultural values, beliefs, and knowledge will be important for future
market mechanisms and the development of international business ecosystems (Hult et al.,
2020) that support the COVID-19 recovery in the LAC region.
CITE AS:
Gonzalez-Perez, M.A., Mohieldin, M., Hult, G.T.M. and Velez-Ocampo, J. (2021), "COVID-19, sustainable
development challenges of Latin America and the Caribbean, and the potential engines for an SDGs-based
recovery", Management Research, Vol. ahead-of-print No. ahead-of-print.
doi: https://doi.org/10.1108/MRJIAM-12-2020-1119
25
Acknowledgements
Maria Alejandra Gonzalez-Perez’s contribution was partially funded by the Centro de los
Objetivos de Desarrollo Sostenible para América Latina (CODS) under the project “Multi-
stakeholder post-COVID 19 recovery: How to re-build business and society in Latin
America in order to avoid a climate crisis”.
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