Caribbean, Latin America most affected by 2020 pandemic
The second half of 2020 began with no less uncertainty than the first half ended. The impacts and characteristics of the coronavirus pandemic were still being identified and documented. Hospitals and medical personnel on all continents were fatigued and under duress. There were still more questions than answers. However, by late summer, quantifiable data measuring the economic impacts of COVID-19 during the first half of the year emerged.
Latin America and the Caribbean (LAC) was identified in by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) as the developing region most affected by the global pandemic.
ECLAC’s 6th Special Report, entitled COVID-19 Response published in August 2020 revealed that the volume of global trade in goods fell by 17.7% in May 2020 as compared with May 2019. In the first five months of 2020, major declines in global trade were attributed to a significant fall in both exports (-18.3%) and imports (-15.8%). Yet, Latin America and the Caribbean as a region experienced more extreme fallout (-26.1% in exports and -27.4% imports).
For comparison, Africa and the Middle East region, which also had negative growth in volume over the period, had a much milder (-13.9%) decline in exports and a mere -2.5% decline in imports.
Latin America and the Caribbean as a region recorded a 10.7% increase in export value from January to May 2018. This declined marginally (-0.3%) in the corresponding five-month period of 2019. From January to May 2020, the value of exports in Latin America and the Caribbean declined 16.6%.
The months of April and May were particularly brutal for regional exports, with COVID-19-driven fallout of -29.5% and -37% respectively. When viewed separately from Latin America, a more realistic view of Caribbean economies emerged.
The Caribbean Community (Caricom), numbering 15 member states and five associate states, had growth in export value of 17.5% in the first five months of 2018. And recorded a 4% increase in the corresponding five months of 2019. The first five months of 2020 showed Caricom exports suddenly declining by -9.7%. However, during the last two of those five months the fallout was way beyond -9.7% and closer to -34.2% in April and -35.2% in May.
Similarly, the Dominican Republic, (not a Caricom member) which had growth in exports in the first five months of 2018 and 2019 had a sudden downturn in 2020 with April and May seeing more than 27% of the DomRep’s export revenues disappear.
Cuba, heavily dependent on tourism dollars, also experienced massive fallout. After a year of successful (+9.5%) recovery in 2019, Cuba faced a -38.3% decline in foreign revenues generation in April 2020; which only got much worse (-51.6%) the following month.
Cuba’s cruise ports, like all others across the Caribbean, faced a bleak winter, but during the period of the ECLAC data collection, hopes were still alive across the Caribbean for an October resumption of cruise. That was not to be.
Global tourism (measured as ‘international tourist arrivals’) had declined by 44% by the end of April and by July prognostications by the report’s authors were that “… for 2020 as a whole, arrivals are expected to drop by between 58% and 78%, depending on how the pandemic evolves.”
As summer arrived infections of COVID-19 spread across Europe and the Americas. Some countries that had been feeling relief that the rate of daily infections had marginally subsided suddenly started to see a resurgence of infections. The value of exports such as (a) mined products (including oil) and (b) manufactures dropped dramatically as compared with the corresponding period in 2019. By the end of May 2020, the value of regional exports of mined products including oil had dropped by 25.8%. Manufactures generated 18.5% less foreign income.
The decrease in income from mined products could be attributed to lower demand and industry-wide price decreases on the one hand or, on the other hand, supply and demand shocks such as a supply paralysis (as in the automotive industry) or a recession in the demand in the main markets for those products.
None of these situations affected agriculture or agro-industry exports in Latin America and Caribbean.
Exports of agricultural products including livestock increased by 0.9% in the five-month period under review. And Agro-industry was the only category (of 11 product groupings) to show growth, increasing in value by 4% as compared to the first five months of 2019. People must eat. And the authors acknowledged this rationale in commenting:
“This reflected the lower sensitivity of demand for food to the contraction of economic activity, as food products are essential goods.”
On the other side of the ledger, the value of imports declined by just over 17%, explained by a 5% drop in prices and a 12% reduction in volume.
All categories of foreign goods purchases were in decline. A contraction (of -14.5%) in imports of capital goods as well as (-13.6% for) intermediary inputs could (and was expected to) affect investment and the recovery. The authors found this particularly concerning. They felt that this could jeopardise the post-pandemic recovery.
As stated previously and elsewhere, cruise ports and cruise passenger reception facilities remained close for business throughout the wider Caribbean. However, cargo ports and terminals had ships to service. The disruptions caused by the 2020 coronavirus pandemic in most other spheres of life played out with less urgency in cargo terminals and created relatively mild concerns for port managers once COVID-19 protocols were established and implemented.
There was a marginal decline (of 1%) in regional cargo port activity. And, in the same period (January to May 2020), total imports and exports (by containers) declined by 6%. The ECLAC study observed that the difference between the two numbers was explained by the fact that “… other operational and trans-shipment movements offset the drop in containerized international trade.”
By the end of June, both ‘total container movements’ and ‘exports’ were down by an additional four percentage points over the May 2020 figures.
ECLAC on regionalisation
The ECLAC summarised its 6th Special Report with observations and advice, paraphrased as follows:
The pandemic is likely to reinforce two interrelated trends that were already taking shape: (a) a shift among the world’s major economies towards less interdependence in production, trade and technology; and (b) a trend towards world trade that is less open, more influenced by geopolitical and national security considerations, with more frequent disputes and with a weakened multilateral framework.
In a global context of increased production regionalisation, regional integration must play a key role in the crisis-recovery strategies in Latin America and the Caribbean. It would also help achieve the scale required to strengthen strategic industries such as pharmaceuticals and medical supplies.
Regional integration, infrastructure and logistics must be included in economic recovery packages. In addition to their sizeable direct contributions to GDP and employment, infrastructure and logistics are essential for production of all goods and services, the supply of food and essential services and international trade competitiveness.
The countries of the region must act to reduce their internal logistics costs and create value-added services to maintain their competitiveness. In the case of infrastructure and logistics, four elements are crucial: investment, interoperability, regional integration and logistics intelligence. The current situation is particularly inimical to initiatives to deepen regional integration. In addition to the known differences in strategic vision, there is now a health, economic and social crisis of epic proportions and the threat of a severe food crisis. There are unmistakable signs of a major reconfiguration of the global economic geography, and specifically indications of a more important role for regions. Therefore, deeper regional integration must be an essential component of any strategy to overcome the crisis. Given the crucial role of the regional market for manufacture exports and small and medium-sized exporting firms, coordinated action to reactivate intraregional trade can mitigate the loss of business fabric and the reprimarisation of the productive and export structure that will be the pandemic’s legacy in Latin America and the Caribbean. 
- First published December 1, 2020
Editor’s note: The preparation of the 6th Special Report by the UN Economic Commission for Latin America and the Caribbean (ECLAC) on the evolution and impacts of the COVID-19 pandemic in Latin America and the Caribbean was headed by the Executive Secretary of ECLAC, Alicia Bárcena with the technical support of the Office of the Deputy Executive Secretary, Mario Cimoli, and the Division of International Trade and Integration of ECLAC.
DOWNLOAD THE FULL REPORT AT: https://www.cepal.org/en/publications/45878-effects-coronavirus-disease-covid-19-pandemic-international-trade-and-logistics.]