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News > Latin America

Latin America Begins to Feel Effects of International Shortage

  • Delivery boys looking at containers, Valparaiso port, Chile, 2020.

    Delivery boys looking at containers, Valparaiso port, Chile, 2020. | Photo: EFE

Published 12 November 2021
Opinion

Since the COVID-19 restrictions on mobility began to relax, the global demand for goods and services has experienced a sudden growth that manufacturers and carriers have not been able to respond to.

The effects of the global supply chain crisis are beginning to be felt in Latin American countries whose economies are highly dependent on the import of goods such as fertilizers, fuels or semiconductor chips.

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Since the COVID-19 restrictions on mobility began to relax, the global demand for goods and services has experienced a sudden growth that manufacturers and carriers have not been able to respond to. This has created bottlenecks in different parts of the world, especially in Asia and the United States.

Brazil

The collapse of the Asian ports is impacting this South American country, which is one of the world's largest food exporters but highly dependent on fertilizers from China, its main trading partner.

The U.S. embargoes against Belarus also affect the manufacture of fertilizers since that country is one of the largest exporters of potassium worldwide, explained Luis Rangel, a special advisor to the Brazilian Agriculture Ministry, who indicated that the effects of the shortage of these raw materials could feel in the next harvest season.

Mexico

The shortage of semiconductor chips is more acute in the Mexican automotive industry, which is the main contributor to industrial GDP and already had a quarterly drop of 0.2 percent in its production levels between July and September.

"We are very vulnerable because we import many products from China or the United States," Pablo Lopez, a professor at the Monterrey Technological Institute said, adding that the railroad block in Michoacan, caused by teachers' strikes, has also affected access to the Lazaro Cardenas port.

Added to this is the fact that accumulated inflation is close to 6 percent, a value that doubles the annual inflation target set by the central bank of Mexico.

"Studies indicate that supply chains will not recover until the end of 2022," Lopez warned.

Colombia

Colombians may have trouble finding some Christmas gifts such as toys, spirits, electronics and appliances, but what they will mostly feel is an increase in prices.

"The shortage helps to increase prices, but the greatest impact is on logistics costs that have risen dramatically", the National Association of Colombian Exporters (ANALDEX) President Javier Diaz said, adding that the cost of bringing a container from China rose from US$ 2,200 to US$ 22,000.

"Latin America barely represents 4 percent of the shipping business. We are not a priority. Therefore, we will have complicated logistics and high costs at least throughout 2022."

The congestion in the port of Los Angeles in the United States has also affected exports of products such as coffee and sugar, as the delay time of an operation increased from 40 to 75 days.

Argentina

The shortage of inputs is notoriously affecting companies related to automobiles, electronics, footwear and agricultural machinery.

"The lower supply of freight and higher transportation costs compound the problems for importing in Argentina, where licenses and foreign exchange are already restricted," said Marcelo Elizondo, president of the Argentine chapter of the International Chamber of Commerce.

Argentina could suffer an exchange shock if the increase in the cost of logistics services substantially increases the outflow of dollars. If this happens, the Argentine authorities could further restrict imports, which could prolong the recession that has existed since 2017.

Chile

Besides experiencing problems in inventories of capital goods, this South American country is feeling the sharp increase in costs throughout the supply chain and the increase in the price of maritime freight," Santiago Commerce Chamber (CCS) Studies Manager George Lever said.

"In addition to the reactivation of demand and supply problems due to congestion in production chains, we feel the effect of households' abundant liquidity caused by early withdrawals of pension funds," he added.

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Luis Rangel
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