(This article is the second of a series of five that look into the consequences of the coronavirus crisis on Latin America).
Finding number two – The economic damages generated by coronavirus were perceptible before the appearance of the pandemic
The following finding may sound paradoxical at first glance, but in reality, it is very coherent. The geographical expansion of the coronavirus is correlated to the economic ties that Latin America has. The pandemic started off in China, and a month later reached successively several European states including Spain prior to expanding to Latin America. Those concerned countries and disease clusters progressively put on hold their economic activity, closed their borders, and quarantined their populations. China is Latin America’s main trading partner. The European Union, chiefly Spain, is a dominant investor in Latin America. Not to mention that Latin America has some of the most privileged and attractive destinations for many European tourists including the Caribbean, Argentina, Brazil, Mexico, and Peru.
This is the reason why the measures that have been taken by China, and by many European countries, ended up having an impact on Latin American countries weeks before the coronavirus has reached Latin America.
By closing their borders and by quarantining their populations mid-March 2020, European governments disrupted touristic flows. Their decision had a strong impact on countries that are dependent on tourism: Cuba, Costa Rica, the Dominican Republic, and – in a significant though less impactful way – Mexico and Peru. All of them lost a great deal of income as well as thousands of employments.
By suspending the activities of its companies, China had to stop, or at least reduce, its orders of primary, agricultural, energetic, and mineral goods. The fall of the Chinese demand and the slump in prices generated an additional loss of income for Latin American countries. Chile and Peru’s copper exportations lost a lot of their value. The same happened with the oil that Argentina, Brazil, Columbia, Ecuador, Mexico, and Venezuela export on international markets. Mexico, with its important automobile industry, had to reduce the activity of its plants. Although they do belong to North American, German, or even Japanese companies, those plants use inputs that come from China. Nevertheless, those were made unavailable starting from February 2020 when Chinese authorities adopted quarantine measures.
At the same time, Latin American countries had been facing a difficult economic and financial situation months before the pandemic appeared. Those strains had ended up having an impact on elections and on social movements all throughout 2019. Coronavirus has been perceived as a factor that would worsen the economic situation. The ongoing health crisis in the United States can only increase the loss of income in Latin America. Its impact on the American circuits of production is also perturbating flows in Latin America. In addition, the unemployment of millions of Americans will most likely have repercussions on the remittances that migrants send to Mexico and to the northern triangle of Central America. Another possible consequence could be a wave of reflux migration from the United States to Latin American countries already in difficulty.
All of this while these countries simultaneously confront the social and health challenges brought by COVID-19 starting from mid-March 2020 (to be followed).
Jean-Jacques Kourliandsky is a researcher on the Iberic world at the Paris-based Institute for International and Strategic Relations (IRIS). He is also the director of the Observatory of Latin America at the Jean Jaurès Foundation.
This article first appeared in French on the Observatory of Latin America at the Jean Jaurès Foundation.
To quote this article, please use the following reference: J-J. Kourliandsky (2020). “Latin America, COVID-19, and the economy”, Observatory on contemporary crises, May 12, 2020, URL:http://crisesobservatory.es/latin-america-covid-19-and-the-economy-j-j-kourliandsky/
This article is part of a series of five that look into the consequences of the coronavirus crisis on Latin America. To read the other articles: