The coronavirus pandemic has plunged Latin America’s Gross Domestic Product (GDP) by 6.8 percent, according to a report released by the United Nations Economic Commission for Latin America and the Caribbean (CEPAL). “This is the deepest recession in 120 years,” said Alicia Barcena, president of CEPAL.
International trade transactions in the region fell by $ 56 billion last year from the previous year. These transactions resulted in the inflow of only USD 105,480 million, which is close to the global level of losses on this account.
COVID-19 pandemic and GDP – recession in Latin America
The uncertainty in the markets caused by the pandemic crisis, Alicia Barcena said, led to a decline in foreign investment in all but five countries in the region: the Bahamas, Barbados, Ecuador, Paraguay and Mexico. The share of foreign investment in Latin America’s GDP in 2020 was only 2.5%, while in the entire previous decade it was at the level of 3.5%.
Brazil, which received the most foreign investment capital before the pandemic, lost as much as 35.4 percent in 2020. of its income from this, while Mexico, the region’s second economy, increased it by 6.6%.
The economic consequences of the pandemic in Central America are dramatic: overall, in all countries of the region, economic revenues shrank by an average of 89.4%. – states the report. Meanwhile, in the Caribbean countries, these losses were many times smaller and amounted to 25.5%.
Coronavirus and investments in Latin America
The report also highlights “fundamental changes in the map of foreign investment in Latin America.”
The share of capital inflows from Europe has fallen to 38%, while US investment has increased by 10 percentage points and now stands at 37% of all Latin American investments in the region.
The report also signals one of the most important new investment trends in the region: China is becoming an increasingly important player in Latin America, acting by creating companies with local capital and purchasing entire companies. While their share in the region’s economy in 2005-2009 was only 1.7%, in 2015-2019 it increased, especially thanks to investments in the green energy, transport and IT sectors – to 16.3%.
According to CEPALU forecasts, “the panorama of the world economy will remain extremely complex also in 2021, when investment is expected to increase by 10 to 15 percent, but the outlook is less optimistic for Africa, Latin America and the Caribbean.”
Main photo source: PAP / EPA / Sebastiao Moreira