Already with one of the world’s slowest economic growth and rocked by ongoing street protests and issues such as corruption scandals, high levels of crime and rising inequality, Latin America is now bracing for the prospects of going further backwards as the number of Covid-19 cases rises quickly across the region.
Due to its high-commodity export dependence and direct trade exposures to China, the US and the EU, the region’s economy and construction industry will be severely impacted by a slower global demand and significant commodity price declines caused by the pandemic.
According to the International Monetary Fund (IMF), more than 25% of Brazil, Chile and Peru’s exports go to China, and the capacity to quickly redirect commodity exports to other countries will become a challenge.
Colombia and Ecuador will also be hurt by a sustained drop in oil prices, though Ecuador, which is struggling to pay its foreign debt and keep on track with a $4.2bn IMF bailout programme, is likely to be more severely hit as it is projected to grow by less than 1% this year.
As a result, GlobalData has revised down its construction growth forecast for the region as a whole in 2020 to 1.6% from a prior forecast of 2.3% in the Q4 2019 update.
At the time of writing, there were over 1,340 confirmed cases and over ten deaths across the region, according to Johns Hopkins University.
While Latin America has a rising middle-class population and a strong healthcare system in a number of places, the region is still very vulnerable and unprepared to handle the increasing number of coronavirus cases.
Venezuela and Haiti are two countries that will be significantly affected. Haiti, for example, has very poor healthcare system, and Venezuela, which now has 36 confirmed cases and is ill-equipped to cope with a further medical shock, is suffering from widespread malnutrition an acute political and humanitarian crisis. To slow the spread of the virus, President Nicolas Maduro recently banned all flights from Europe and Colombia and ordered businesses to close and people to stay at home.
As the number of cases continues to rise, many other governments across the region have also started to take actions. In Panama and Peru, national authorities have ordered people to stay at home except for essential business services such as supermarkets, pharmacies and banks, while in Colombia, the government has closed its borders with Venezuela and has ordered people arriving into the country to go to a 14-day quarantine.
In Brazil, which now has 350 confirmed cases of the disease and two deaths, the government is seeking the congress approval to declare a state of emergency that will allow it to loosen fiscal targets, release funds and make necessary investments to fight the virus. In the past few days, the government has set aside $29m in funds to slow the spread of the virus and has closed its borders with Venezuela.
Chile, Peru, Bolivia and Argentina have also closed their borders. The government of Argentina, which is soon due to renegotiate $100bn of debt and is grappling with an economic recession, high levels of inflation and a weakening peso, has put a 30-day travel ban in place for all flights coming from Europe, US, China, South Korea, Iran and Japan.
Meanwhile, in Mexico, which has registered 93 cases and no deaths so far, the government of President Andrés Manuel López Obrador has been criticised for continuing to hold mass rallies and events and failing to take any drastic actions to prevent the spread of the disease.