Latin America post-pandemic: debt, financial instability, and uneven economic recovery

Abstract

This paper deals with the discussion of the effects of the pandemic on public and private indebtedness in Latin America, which reached record levels in 2020. We seek to critically map the implications of massive private indebtedness for financial instability in the post-pandemic context, anchored in the theoretical contribution of heterodox economics - especially inspired by post-Keynesian literature and discussions on development by Latin American structuralist authors - and supported by the interpretation of descriptive statistical data. Imminent risks include: a) an increase in non-performing portfolios; b) inertial overaccumulation of debt; and c) bankruptcy accompanied by job losses. However, when analysing the behaviour of public debt to finance exceptional government spending to counteract the negative economic effects of the pandemic, we find that it both contributed to making the fall in economic activity less pronounced and facilitated the conditions for a better economic recovery.