Sunday Brief

Washington is struggling to gather the region’s heads of state for the Summit of the Americas. The countries have been neglected too much – a warning for the EU as well?

Even though the systems are under heavy pressure, Latin America remains the region with the highest density of democracies after North America and Western Europe.

Because of its wealth of raw materials, energy resources and agricultural products, the region is becoming hotly sought after – this development must not be overlooked.

Recent government measures are not only a cause for concern in the economy, but finances nevertheless remain stable.

Mexico and Brazil also condemned the invasion of Ukraine at the UN General Assembly. The economic impact is still uncertain.

Despite omicron and high inflation, foreign investors are betting on the region. This increases purchasing power, among other things.

In the current confrontation of China and Russia with the West, South America could move away from Europe.

Brazil, Argentina and Peru have now the opportunity to become more attractive as business and investment locations through OECD membership.

However, individual economists see high inflation as a greater threat to growth in the region than the new covid wave.

At the same time, digital transformation could bring much-needed productivity gains to the region.

Growing government services, financed by higher taxes or larger budget deficits, could slow the economic recovery.

Argentina, Brazil and Mexico held back at the G20 summit and COP26. But companies in Latin America are responding with their own initiatives.

Among other things, concessions for trunk roads and port terminals as well as mobile communications licenses will be auctioned.

Only Asia will grow more strongly than Latin America in 2021, according to the IMF forecast. However, due to risks, the outlook for 2022 is more subdued.

Surprisingly, Mexico’s president declared that his country wanted to give new impetus to the region’s integration process. The role model, he said, would be the EU.

Agriculture, but also mining, energy and transport sectors in the region are more and more suffering from the increasingly frequent droughts.

Not only the region’s trade with China is growing. The infrastructure of the new Silk Road will also accelerating exchange with the whole of Asia.

Latin America has a surprisingly clean energy matrix and could benefit from the global green transition through resource abundance.

Why are the peso, real and sol so weak, even though at the same time many South American countries are rapidly emerging from pandemic recession?

Good growth forecasts give hope for the region, but political factors, rising inflation or falling commodity prices could cloud the picture.

Beijing is cleverly using the issue of sustainability to fill the gap left by Europe’s unwillingness to engage in dialogue. Can the EU afford that?

There is a paradox: The region is the most important supplier of food to the world market – but its own population can afford it less and less.

Interim conclusion after two and a half years of new government in Latin America’s two most important locations for German companies.

However, this new generation of leftists – unlike its predecessors in the 2000s – would have fewer resources at its disposal.

The country is now electing a constituent assembly. Within one year, it will negotiate a new constitution. This is an attempt to rebuild trust in democracy.

Corporations and states in the region can usually obtain credit abroad without any problems. Nevertheless, financing could become more difficult.

In Ecuador and Peru, elections have now been held. The Brazilian government successfully auctioned off licenses for airports, rail lines and ports.

Despite vaccination campaigns and lockdowns, the saying “When Brazil sneezes, South America has the flu” is confirmed.

At the beginning of the election cycle in the region, it appears that poor crisis management is leading to even greater polarization in politics.

The numbers of new infections and deaths are reaching record levels. The government’s crisis management puts also the Real under pressure.

Countries such as Chile, Brazil and Mexico are ahead of most others in terms of vaccinations. Now, the only thing that must not stop is the supply of vaccines.

The hope that many Latin Americans were already immune was deceptive. In the best case, control of the pandemic will be achieved there in early 2022.

Companies that want to remain competitive in South America will have to invest heavily. Some don’t want to risk that in view of the unclear scenario.

Whether Latin America can benefit from the growth of the global economy depends on how quickly the pandemic is contained in the region.

There are increasing signs that prices for raw materials and energy are rising. This could become a driver of growth and investment in Latin America.

Hope is growing in Latin America. Despite a renewed rise in the number of infections and still unclear growth prospects, investors are back.

A renewed rise in infections would be catastrophic: all economies have recovered in the last three months. But now activities are stagnating again.

Latin America has become more important for the US. Washington is therefore adapting its policy. This process will continue – regardless of who will win.

A muted recovery of capital flows to the region, moderate growth prospects and continued pressure on local currencies are expected for 2021.

2021 should become the key year for Latin America. After that, it should be clearer whether the region is threatened with another lost decade like the previous one.

The OECD has just noted that among the world’s largest economies, Brazil is the country with the most signs of expansion in August – after China.

It seems that Latin America is being bypassed in the reorganisation of global value chains and at the same time is moving further away from Europe.

More and more states in Latin America are returning to normality. Financial investors appear to be banking on an economic recovery.

Governments allow openings in trade and services. In the short term, growth rates will improve, but the recovery will be slower due to the need for new closures.

The loss of soft power will cost Brazil, and thus all of South America, dearly. It will take decades to make up for this loss of confidence.

The continent could remain in recession longer and more severely than the rest of the global economy. But there are also rays of hope.

AMLO uses the Corona crisis to restructure the economy: State-owned corporations are expected to dominate the economy.

It is likely that after the Corona crisis the economies of the region will be more state controlled and the population poorer.

Rating agencies pay closer attention to the quality of the governments in the countries and include this in their risk assessments.

After the first, partly successful crisis management, governments in Latin America are reacting increasingly chaotically.

There is too little testing and great uncertainty about the impact of the pandemic.

The economic impact of the pandemic could be more severe for Brazil, Mexico and Argentina than for Chile, Peru and Colombia.

COVID-19 has also reached the Latin American markets: trends and analysis of the economic impact of the pandemic.