Latin America faced COVID-19’s perils in May

Economies in Latin American nations experienced a difficult may because of the spread of the COVID-19 virus and government reactions to it. Economic activity and industrial output fell throughout the region, while Brazil was among the nations that also experienced political turmoil accompanying it.

Ripple effects from the rest of the world and the rise of new cases made April a difficult month on its own. South America’s steel output in April fell by more than 42 percent compared with April 2019, according to Brussels-based Worldsteel.

In the first four months of the year, Argentina—which has economic problems beyond those caused by COVID-19—has witnessed a 31 percent drop in steel output compared with the year before. Through the end of April, Brazil had experienced a less dramatic 14 percent decline in steel production, but in May the nation showed signs of entering more uncertain economic waters.

Brazil’s President Jair Bolsonaro has caught the attention of the world with an attitude toward virus contagion (describing it as a “little flu”) that has dumbfounded much of the rest of the world. It comes at the same time his administration also has angered some voters with its willingness to support deforestation, and while Bolsonaro and at least two family members are under investigation for corruption.

With some 440,000 confirmed or suspected COVID-19 cases and state and local lockdowns that are taking place despite Bolsonaro’s wishes, Brazil’s economic statistics are likely to be woeful in the second quarter of 2020.

Mexico’s President Andrés Manuel López Obrador also is being criticized for a perceived slow response to COVID-19. Like Bolsonaro, he has been quoted in ways perceived as minimizing the risks of the virus, and he passed emergency measures some 50 days after the World Health Organization encouraged governments to do so.

By late May, hospitals in Southern California were reporting what they considered to be high numbers of COVID-19 patients who were American citizens unable to gain treatment in Mexico where they lived.

Despite virus-related impacts, Obrador says he sees near-term hope for Mexico’s economy based on the enactment of the United States-Mexico-Canada Agreement (USMCA) July 1. That pact replaces NAFTA (the North American Free Trade Agreement) as a trilateral trade platform.

At a news conference in late May, Obrador said Mexico can benefit with the USMCA coming into force at the same time the Trump administration is encouraging companies to decouple from the People’s Republic of China.

The New York Times quotes the Mexican president as stating, “That means this big factory [China], the biggest factory in the world, will reduce its output. And this gives us the opportunity, Mexico, for more investment to arrive, for companies to set up, for jobs to be created.”

Figures from the first quarter of 2020 from the Banco de Mexico, however, show a 26 percent drop in foreign direct investment (FDI) into Mexico compared to the same period in 2019.

The epidemic in other parts of the world likely played a role, while critics of President Obrador say his left-wing policies are part of the problem. “This is the third fall in the first five quarters of the current government, and in the future [this pattern] could be maintained downwards by the policy of the government of Obrador,” writes the Mexicanist.com website.