Although the coronavirus and the subsequent mobility restriction measures struck a blow to all Latin American economies during 2020, the intensity of the recessions was notoriously uneven. This is reflected in the official data – and some preliminary data – recently released by the statistical offices or the central banks of each country, where Chile appears among the least affected with a contraction of 6%.
The economy that best withstood the pandemic was Brazil, which saw a 4% decline, while at the other extreme is Peru with a collapse of 11.1%. Colombia and Mexico are the other countries that already have consolidated data and, where applicable, the setbacks in gross domestic product were 6.8% and 8.5%, respectively.
In each case it is the worst recession experienced in decades, even for Brazil. The latter has not experienced a contraction of that magnitude since 1990, while for Peru it is the worst drop since the 13% collapse in 1989 and for Chile, 13.6% in 1982. In the case of Mexico, we must look to the The Great Depression of 1932 and the one in Colombia has been unmatched at least since the records began in 1975.
Although all in crisis, the difference in their depth is due to issues both outside and related to the pandemic. In this framework, the first thing to assess are the pre-pandemic conditions, an aspect that is particularly relevant to understand the result of our country.
“Let us remember that in the case of Chile the fourth quarter of 2019 was bad due to the effect of what happened as of October of that year, so the comparison rate for the fourth quarter of 2020 was less demanding. That helped the drop, at least from a statistical point of view, to be less pronounced, “says Alejandro Fernández, a partner at Gemines.
Indeed, according to Imacec data, between October and December 2019 the fall in GDP was 2.2%, while in the same period of 2020, activity held out with a limited decrease of 0.4%.
Another relevant factor for the analysis, which also benefits Chile, is the response to the crisis. Fernández highlights that both the support of the Central Bank, which quickly lowered the interest rate and developed financing and credit promotion programs for banks, and that deployed by the Treasury, with stimuli that totaled more than 8% of GDP, “play a very important role to partially offset the effects of the pandemic on last year’s results ”.
This is also the case in Brazil, where a stimulus of US $ 30,000 million was injected to face the pandemic crisis. Although in this case, it would also have contributed the fact that containment measures were not as severe as in the rest of the neighborhood, which passed the bill in terms of lives, being the second country (after the United States) with more deaths in the world (a total of 240,940 deaths).
At the other extreme, that Peru took the worst part is explained by the fact that “the restrictive measures were quite severe and lasted for a long time because the infections continued significantly.”
With a vaccination process underway in several neighboring countries, a generalized rebound is anticipated for the region, which according to IMF estimates, after registering a contraction of 7.1% in 2020, would rebound 4.1% this year .
The same body applied upward corrections to all the economies in question at the beginning of the month. In this way, it anticipates increases in GDP of 9% in Peru, 5.8% in Chile, 4.6% in Colombia, 4.3% in Mexico and 3.6% in Brazil.
In the case of Chile, Moddy’s also improved its growth prospects on Tuesday, from 4.5% to 5.8% for this year. According to the report prepared by the team led by Ariane Ortiz-Billín, there are two reasons behind the most optimistic photograph that they show of our economy.
“The shortage of supply and demand in the copper markets and the particularly strong demand from China have pushed copper prices above pre-pandemic levels,” they first detail, then highlight that “the deployment of vaccines in Chile it is progressing very rapidly. At the current rate, Chile could achieve herd immunity (that is, vaccinating 80% of the working-age population) by July, which would support economic recovery. “