The future for Latin America

October 2020

Covid-19, by its pandemic nature, is having a major impact on economies around the world. However, as some parts of the world experience a fall in infections, confirmed cases in Latin America are rising sharply. As I write, Brazil has passed three million confirmed cases – second only to the US – while major outbreaks have occurred in Mexico, Chile, Colombia and Peru.

Recent statistics would seem to confirm Latin America as the new epicentre for the virus. On 10 August, the BBC reported that deaths in Brazil, Mexico, and Peru remain high while falling dramatically in the UK, Italy, and France. In the same article, the BBC quoted Dr Carissa Etienne – Head of the Pan American Health Organization – saying, ‘There can be no doubt our region has become the epicentre.’

There is no denying that Covid-19 is a humanitarian catastrophe but accompanying that is an inevitable economic crisis. We can’t avoid this but what impact has it had and what can we do to ensure a recovery once we have the virus under control? I asked my Russell Bedford colleagues elsewhere in the region for their experiences.

The Covid-19 effect and the economic outlook for Latin America

Countries in Latin America began the Covid-19 journey from different economic bases. For example, here in Argentina the economy was already shrinking with high debt and lack of investment. However, Colombia started 2020 with two months of significant growth. ‘Covid-19 has put the brakes on this growth. We believe some sectors will begin to recover during the second half of 2020 while others will struggle, resulting in higher unemployment,’ believes Luis Carlos Robayo.

For those relying on tourism, Covid-19 and the ensuing restrictions on international travel have had a particularly unwelcome effect. ‘As a major tourist economy, it is no surprise that in Mexico the most affected sectors are tourism and hospitality. The government’s economic plan has helped the most vulnerable in society, but economic recovery depends on help for businesses,’ says Javier Jiménez.

Success in the current economic environment

While it is true that many sectors of the economy have been hit hard by Covid-19, this is not the case everywhere. Those businesses with an online presence and others able to react flexibly are showing some success.

In Uruguay, Bruno Foggiato has seen evidence of this: ‘Those businesses that adapted quickly and found new ways of reaching their clients are faring better than others.’

In Costa Rica, Fernando Sanchez has also witnessed some positive signs: ‘Businesses that have managed to make the shift to online sales and delivery have done well. Other sectors doing well include medical, retail, technology and communications, and agriculture.’

So what steps can businesses take to preserve and sustain growth during a crisis such as Covid-19? Roger Maciel in Brazil believes there are three important priorities for businesses looking to sustain themselves during the crisis:

‘As far as possible, continue as normal while adapting to the new reality. Next, focus on your existing clients who know and trust your services. Also, secure the work environment for your employees and clients.’

Surviving and thriving in 2021

Other than those businesses doing well during the crisis, the focus for many will be on surviving into next year. But having made it to 2021, what do businesses need to do to ensure they thrive, and where will they find new clients?

Here in Argentina, Daniel Intile will be focusing on ‘service providers, especially in the IT community’. While in Colombia, Luis Carlos Robayo believes it is time to ‘understand and use technology such as data analytics, big data, and artificial intelligence. There will also be opportunities to strengthen your offer by collaborating with other professionals.’

Looking for new clients, Ramiro Pinto in Ecuador is focusing on ‘multinationals wanting to invest in Ecuador while also concentrating on retaining existing clients’.

Opportunities in Latin America for investors

Once the pandemic and the crisis are over, will there be opportunities for inward investment? Roger Maciel thinks that ‘…the prospect of a strong US dollar may well see the flow of investment restart’. Daniel Intile believes that ‘Latin America has always offered opportunities in raw materials and energy and some countries have reached a level where they can now compete globally’.

And which countries are best positioned to benefit from any future inward investment? Ramiro Pinto says, ‘Colombia, Peru, and Chile may offer the most attractive investment proposition currently, while Ecuador’s use of the US dollar as its currency should stand it in good stead.’ However, Javier Jiménez believes ‘…Mexico’s dependence on the US and the reduction in the flow of exports from the US, and Brazil’s reliance on China may deter some investors’.

Be ready

Undoubtedly, the region is in for a rough ride – forecasts of large falls in GDP are commonplace. However, countries will come out of this, albeit with more debt and the prospect of higher taxes, and economies will recover. Being optimistic, this crisis gives businesses an opportunity to rethink their strategies to serve a market that may look somewhat different to how it did before the crisis. Businesses need to ready themselves for this.

About the author

Daniel Ryba
Buenos Aires, Argentina

Daniel Ryba is a partner in Russell Bedford Argentina and a member of the board of Russell Bedford International. He is a consulting actuary, specialising in actuarial auditing and consulting. Prior to joining Russell Bedford Argentina in 2006, he was the chief actuary in the Argentinean subsidiary of a leading international insurance company and a consultant in a global firm of actuaries and employment benefits consultants.

Author: Daniel Ryba - Russell Bedford Argentina, Buenos Aires, Argentina

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