Latin American Exports and the COVID-19 Crisis

Back in 2019, when things were ‘normal’, Latin America was expected to grow 1,8%. But today, the region’s economic outlook is changing by the minute. With extended lockdown measures, oil prices plummeting, and cargos being held off, Latin American are full of uncertainty.China and the United States (US) are key figures in the dynamics of Latin American economies. China has many trading partners in South America, receiving a large amount of exports from Peru (23%), Brazil (28%), Chile (32%) and Argentina (75% of its soy and meat). Meaning that these countries are the most exposed to the decline of the Chinese economy. Meanwhile México, Colombia, Central America and the Caribbean countries, might not feel much of an impact from China. Instead, they will have to worry about the performance of the US economy. For example México, which sends 80% of its exports to the US, will be extremely vulnerable to any fall in the demand.For Carlos Cordero, an independent advisor on macroeconomics and ex-manager of the Ecuadorian Central Bank, “The case of Latin America is very concerning.” He says that “In the degree in which big buyers of Latin American commodities will enter a recession, independently of the products that Latin America provides them. (…) There’s going to be a decrease of their sales volume. After the demand drops, the prices will go down”.So, how are some of the commodities related to agribusiness doing today?

Soy exports

Argentina and Brazil, the primary Latin American exporters of soy, have seen very different results. The Argentinian government informed the public that the lockdown measures could produce shortages in domestic and export markets, which was reflected in a 6,9% decrease of exports in March, compared to the same period last year. Meanwhile in Brazil, exports grew an astounding 37.6% compared to the last year, in the same month of March, thanks to a trade deal with China.

Beef exports

Beef exports in Uruguay, a primary exporter, dropped almost 30% compared with last year, linked to a drop in demand from China, their biggest buyer. Meanwhile in Argentina, there was more bad news: Argentinian exporters shipped only 15% of the 50.000 tons of beef that were going to China, due to problems with logistics related to the quarantine measures. Mr. Cordero says the surplus production won’t go to another market, because in general all markets are experiencing difficulties. And referring to a possible solution he says that “You could maybe sell the production internally. But it would be difficult, because the demand is saturated already”.

Pork meat exports

México is increasing its exports to China, potentially being able to ship 60.000 tons of pork meat this year, while in Colombia, the Association of Pig Farmers says that they can keep up production without interruptions. Though, they will need support from the Colombian government to guarantee supply. Unfortunately for Argentina (for whom nothing seems to be going right at the moment), they are having problems with the pork meat exports, again due to logistics issues related to lockdown measures.

Coffee and flower exports

In Colombia, coffee prices are nearing the $1.20 per pound, which is much better than the prices from the 2018 crisis. But the flower exports are not doing so well. Almost 50% percent of the scheduled sales have been cancelled, according to Asocolflores. Carlos Cordero says that if coffee is considered a staple food, maybe the sales won’t perform negatively. But, regarding to the recovery of the flower trade and other luxury goods, he says “it will be very slow, because it isn’t tied exclusively to the recovery of the country's productivity, but also depends on the recovery of the consumer's purchasing power”.In other words, about the current situation for the Latin American exports, he says that “undoubtedly the economic recovery is not going to be immediate for China and the United States. (…) And the commodities linked to these countries are going to have a more or less slow growth, or will go at the same rate as the recovery.”Nonetheless, there is hope that the decline in exports to major economies will encourage the growth of domestic markets, and that solutions throughout the logistics sector will allow products to quickly reenter markets.