According to a special report on COVID-19 prepared by the Economic Commission for Latin America and the Caribbean (ECLAC), this region faces the pandemic from a weaker position than the rest of the world. Before the outbreak, the region was estimated to grow a maximum of 1.3% in 2020. Now, a drop in GDP of at least 1.8% is projected. Moreover, the development of the pandemic could lead to forecasts of 3 to 4% contractions or higher. According to ECLAC, the final economic impact will depend on the measures taken at the national, regional, and global levels.
According to the report, the health crisis could affect the region through five external channels:
The decrease in the economic activity of the region's main trading partners, since Latin America and the Caribbean depend on their exports.
The fall in the prices of primary products, as the sharp falls in prices and the deterioration in trade terms will have strong negative effects on the income levels of the Latin American economies that depend on these exports.
The interruption of global value chains, given that the disruption of supply chains would mainly affect Mexico and Brazil, who have the largest manufacturing sectors in the region.
The lower demand for tourism services. This would greatly affect the small island developing states of the Caribbean, in particular.
Intensifying fear of risk and worsening global financial conditions. This entails a greater demand for safe assets, a lower demand for financial assets in the region, and a significant depreciation of the region's currencies.
The value of the region's exports is estimated to drop by at least 10.7% in 2020. Likewise, the volume exported is expected to contract by 2.5%.
ECLAC projects that the greatest impact will be felt by the countries of South America that specialize in the export of primary goods, as they are more vulnerable to the decrease in prices.
Regional exports to China would decrease the most this year, close to 21.7%. The most exposed countries would be Argentina, Brazil, Chile, and Peru.
Mexico is the most vulnerable country to the changes in the US supply and demand conditions, especially in the manufacturing sector. Costa Rica is very dependent on the economic conditions of the North American country and can be greatly affected by it since nearly 10% of its GDP depends on that country's supply and demand.
Chile, Mexico, and Brazil are the most vulnerable to the changes in EU's supply and demand conditions, as nearly 5% of their GDP depends on the added value of the EU's service and manufacturing sectors.