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Few would argue that COVID-19 has changed the world. The pandemic has shone the spotlight firmly on the need for businesses to embrace change, to react quickly based on high quality information, explains Chris Danes, Tax Partner at MHA MacIntyre Hudson, the UK member of the Baker Tilly network, and responsible for the Global Tax Solutions team.
When COVID-19 hit Europe, it hit hard. Within weeks, the region overtook China in terms of the number of recorded cases and became the active centre of the pandemic. Three months after measures were introduced to protect lives, Europe is now easing out of lockdown - slowly and cautiously.
With China the epicentre of COVID-19, many countries within the Asia Pacific region were the first in the world to go into lockdown
Life after COVID-19 lockdown: the view from Latin America
This month Latin America reached a grim milestone as it became the new epicenter of the COVID-19 pandemic. Collectively the region surpassed 50,000 deaths, and Brazil became the second-worst affected country in the world. Governments across the region have, for the most part, responded in the same way to the pandemic, explains Donny Donosso, Baker Tilly’s Regional Director for Latin America.
Listen to the fourth of our Great Conversations Podcasts in which we look at life after lockdown: the view from Latin America.
“While some countries were quicker off the mark than others, it has been interesting to see how each country across the region has taken pretty much the same steps in terms of public healthcare and assistance to companies and individuals.
“Throughout the whole region, the focus has been on providing tax incentives and exemptions to much needed medical supplies.
“For companies and individuals, income tax filing dates have been pushed back to later in the year, VAT exemptions granted, and many social security payments for employees are being provided for by the government, albeit in different ways.”
A move too soon?
Latin America has large pockets of poverty and a high proportion of informal workers without health coverage or any means of surviving in lockdown, which has pushed some countries to consider de-escalation before they have reduced their contagion rates.
“Baker Tilly in Chile, as well as many of our members in the region, has become a major advisor to companies on how they can benefit from government stimulus and recovery incentives.”
Many Latin American countries, in particular the Dominican Republic, rely on international and local tourism for a sizeable chunk of their GDP, and border closures have especially devastating implications in the region. Reports suggest that despite the country not having reached the peak of its epidemic yet, 30% of Colombians intend to travel outside the country this year.
So how prepared are countries for life after lockdown?
“COVID-19 has impacted countries throughout the region in very different ways”, explains Donny.
“For some smaller economies, like Ecuador, the impact on their economic and health systems has been far great than others, so the likelihood is they will struggle to continue the life after lockdown.
“On the other hand, the southeastern countries like Argentina and Uruguay were probably not only better prepared beforehand but also have seen less impact from the pandemic.
“Colombia was one of the first countries to go into complete lockdown – and the peak of the virus is not expected to hit until mid- to late-July. So, we are ready to travel again and to revive the tourism industry here. Having the national airline moving again – the second oldest airline in the world – is of regional importance. So, while we have a long way to go to beat COVID-19, the expectation is for internal flights to resume in July, and for international travel restrictions to be lifted in September.”
Elsewhere in the region, the Brazilian state of São Paulo‘s government and Airbnb have reached an agreement to speed up the resumption of tourism in the post-pandemic phase. The state of São Paulo is the company’s first partner in Latin America in a global initiative, alongside regions in the United States, France, Denmark, South Africa and South Korea.
While Brazil has been hit hardest in the region by COVID-19, a survey by the Brazilian Institute of Corporate Governance (IBGC) shows that, despite the fear of negative effects brought by the pandemic, there is a significant portion of executives and employees who anticipate a wave of investments in technology and evolution of processes that would take years to happen under normal circumstances.
A swing in purchase power
As a whole, the Latin American region relies heavily on foreign investment. But while any changes to foreign direct investments will impact the region, it is also forcing the region to think differently about purchasing and keeping certain industries moving.
“We are a region that depends heavily on foreign investment. COVID-19 is forcing us to think differently in the way in which purchases and industries need to move.”
“For us, the impact of reduced foreign investment is not a political argument like in other countries”, says Donny.
“We look at purchase power and how we assist each other. When foreign investment decreases, the gap is plugged by local investment: we have huge local markets. We don’t believe change will be harmful. On the contrary: it will create tighter bonds between our countries and outside the region. Mexico, Chile and Colombia, for example, are full OECD members and that increases the number of double tax treaties and trade opportunities with European partners
“So yes, COVID-19 is shaking things up. But in the end, I think that we're going to continue pretty much in the in the same status as before.”
Listen to the full podcast: Life after lockdown: the view from Latin America.
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