Welcome to our weekly roundup of news from South America.
Mosoj ESG provides information, data and analyses relating to South America integrating Environmental, Social and Governance topics to promote sustainable development.
This is the end, beautiful friend
This week’s biggest news was no doubt the arrival of a new US president in the White House. A lesser news, albeit possibly just as important for South America, was that Janet Yellen, the former Chair of the Federal Reserves, is due to take office as the new US secretary of the treasury.
For sure, how the US economy performs over the next 12 months matters a lot for economies in the region, but not in the way one might think. Indeed, a strong US economy would normally be welcomed as it would spur consumption of goods produced by South American countries.
This even though South American countries appear to see less and less of the benefit of a growing US economy. As can be seen below, the total value of imports from South America has been on the decline reaching an already low point of $76.5bn in 2019, before the pandemic shock.
Source: IMF
Of note, this represented just 2% of the combined GDP of South American countries, while the main export from South America remained crude petroleum. A growing US economy would normally translate into increase demand for energy sources, a positive for resource-rich countries.
As such, South American countries ought to welcome a recovery in the US economy. Especially as the region is battling against yet another wave of coronavirus, which is likely to result in another drop in economic activity, as suggested by google mobility data. This will damage even further already fragile economies, with difficult to assess dramatic social consequences, a scary time for the region.
Source: Google Mobility Data
But herein lies the paradox. The pandemic has changed the positive relationship of : Growing US economy = Good for South America. Indeed, the accommodating US monetary policy during the crisis has translated into a huge amount of liquidity flow to emerging markets, which has helped to alleviate the immediate fears of sudden yield increases, defaults and/or liquidity shock in the region.
As the US economy eventually starts to recover and gets stronger, the Federal Reserves will have to stop its asset purchasing programme. This is problematic for the region as such a move would risk a repeat of the “taper tantrum” of 2013. Indeed, the mere suggestion that the Fed would taper with its asset purchasing would send bond yields sharply higher, and probably trigger a sell-off in emerging market securities.
Looking-forward, it is thus difficult to see how the region’s economic fundamentals will recover by the time the US economy starts looking stronger. Another episode of taper tantrum could prove fatal to many countries and many investors will be left “swimming naked”. There is still some time, as the pandemic continues to rage across the US and Europe, but vaccinations are on their way and hence “tapering” could start early 2022, with signals from the Fed being given late 2021.
China may be the region’s largest trading partner, but it is the US that continues to determine its fate. For South America, the US is now a risk while China is an opportunity, something President Biden should consider carefully.
IDB and BNDES invest $28 mn to reduce PPP “mortality” in Brazil
Tourism loses $9.7 bn in the pandemic, says FecomercioSP
Credit in Brazil grows in 2020 at the fastest pace since 2012, says Febraban
Aeris negotiates $463 mn contract to supply Siemens Gamesa with wind blades
Engie to invest $407 mm in wind power in Brazil
Wind generation reaches capacity level of 45.77% in December
Copom keeps basic economic interest rate at 2% at first meeting 2021
Mercado Livre closes $1 bn issue to invest in credit and logistics
São Martinho Group obtains $177 mm from BNDES for investments in plants
Fitch gives AA(bra) rating to Eletrosul $14.4 mm emission
Mergers and acquisitions fall 5% by 2020 in Brazil
Brazilian e-commerce sales grew 154% during Christmas week, indicates Mastercard
Brazil has lost on average 17 factories per day in the last six years
Albanesi Group unveils investment plan of over $600 mn
The primary deficit in 2020 reached 7.4% of GDP
The industry grew 6% in December
Construction costs rose by 42.3% in 2020
Agribusiness has already lost more than $145 mn due to the transport strike
Mercado Libre is already worth almost $100 bn
The fiscal deficit was 6.5%, and the financial-fiscal debt was 8.5% in 2020
During 2020, national public debt increased by more than $13 bn
Astra Evangelista is accused of unfair competition and owes YPF $101.45 mn
Customs denounced the alteration of figures in foreign trade for $330 million
Santiago Stock Exchange and S&P Dow Jones launch sustainable index that includes 26 local companies
Payments for first and second 10% withdrawals amount to $32.7 bn
Consumer confidence falls 12 points to July levels
Gold Fields breaks ground on $860 mn gold project in Atacama Region
New home sales in Santiago plummeted 48% in 2020
Sernac: Nearly 4 million people compensated for more than $55 mn in 2020
Chamber passes Fogape 2.0 into law
More than 2.1 million households applied for the IFE and the COVID Bonus
Survey shows that 58.3% of Chileans feels there is lack of transparency in recruitment process
IFC to facilitate $50 mn to support Vatia´s renewable energy expansion plans
Afinia to invest $ 201 mn in 2021 in northern Colombia
New Covid19 restrictions would have an economic cost of $ 2.3 to $ 3.6 bn: Fedesarrollo
Colombia’s Ecopetrol says oil theft from pipelines rose 46% last year
Colombia received $693 mn in foreign portfolio investment in 2020
Foreign direct investment in Colombia fell 35% in 2020
Colombia closed 2020 with public debt of 61% of GDP
Colombian Industrial Production Index fell 7.1% in November 2020
Close to 2.8% of GDP lost in salaries during 2020 in Colombia
Colombian agricultural exports exceeded $ 6.9 bn as of November 2020
Nine thousand hectares of soybean are affected by the rains
Twenty-five thousand families will have access to resources for productive enterprises
Return of AFP contributions will inject up to $1.2 bn into the economy
The Bolivian insurance sector grows by 3.7% in nine months of 2020
Rains affect banana exports; losses estimated at $100,000 per day
Storms hit the country and flooded at least 60 municipalities
Potassium chloride export plummets 78%
The production of ginger in Villa Tunari triples and the price increases by 400%