Considerations for Latin America
The spread of COVID-19 across the world has caused significant disruption to businesses and supply chains, and the same is true in Latin American. The region felt the impact of the virus even before it reached its borders. As Chinese and European demand slowed, Latin American economies began feeling the effects of the incoming storm. Furthermore, the coronavirus pandemic is heavily affecting travel and tourism industries, once one of the fastest-growing industries in Latin America. Coupled with the eventual decrease in domestic consumption and record lows in the price of oil and gas, the spread of COVID-19 became the perfect storm for many economies across the region. And this was before Latin Americans became infected. As the pandemic became a health crisis in the region, all of this was magnified considerably.
The bottom line is that uncertainty and vulnerability for global corporations, their employees and partners across this dynamic region has reached record highs. As we provide counsel to our clients and partners on responses for this situation, there is one message we believe is worth stressing repeatedly for global corporations: there is no one-size fits all approach to COVID-19. The level of stress and business disruption being felt varies across geographies and industries, and Latin America’s uniquely complex situation will demand an equally tailored approach.
Government response to COVID-19 has varied significantly across Latin America. While, many countries in the region, particularly in Central America, pursued early strong containment, going as far as agreeing on a regional contingency plan to deal with the pandemic. The two countries with the largest GDP, Brazil and Mexico, received criticism for being slow to react.
The impact felt on each country will also differ. For instance, Argentina was already facing a troubled fiscal environment well before the reduction in oil prices and COVID-19 health crisis. Similarly, Colombia’s high dependency on oil revenues and tourism will mean a particularly challenging environment. Furthermore, as automotive plants are shut down across North America, plants in Mexico have also been stained. In Brazil, initial signs of social disconformity began on March 17th when citizens took to their balconies armed with kitchenware to demand a stronger response from their government – embracing one of Brazil’s longest lasting social-protest traditions.
There are some positives in the response. In this time of great uncertainty, the Latin American business community has been swift to react and stepped up to provide extraordinary leadership. Corporate leaders in the region have taken concrete steps protect employees, partners, and ensure business continuity. This situation has demonstrated that businesses of all sizes and scopes can take a critical role in contributing to society in the direst of times.
Navigating the immediate crisis is just a first step. As the pandemic is controlled and the dust settles, there will be additional challenges to address for global corporations operating in Latin America, particularly in some of the largest economies in the region. From revamping Mexico’s NAFTA-oriented manufacturing economy, to expanding Brazil’s booming agribusiness, to reigniting oil and gas operations in South America, the region’s challenges will abound and only be amplified when normalcy returns, whenever that may be. The reality for business is that there is no unified solution when dealing with Latin America’s complex cultures and economic realities will persist. Business leaders must be prepared to continue to rise to the many challenges ahead.