As confirmed by the most recent SACE data, in April Italian exports discounted the effects of the maximum lockdown phase in the main outlet markets, recording a fall (-34,9%) compared to the previous month. The same trend balance for the first four months of the year is negative (-11,8%) compared to the previous three months. In the global context, the impact of the pandemic intensifies, particularly in ASEAN markets (-47,8%) and OPEC countries (-44,9%), but also in European partners such as Spain (-46,1%) and Austria (-40,2%). In particular, the contraction in demand from EU countries intensified in the first quarter, where the number of infections continued to grow.
The Netherlands (-2,6%) and Poland (-7,8%) held up the most despite going negative, while Spain (-16,9%) and Romania (-15,7%) recorded the greatest drops. More marked decline for the non-EU area (-12,8%), where India (-27,1%), China (-20,8%) and the United Kingdom (-17,8%) were particularly affected . Exports to Belgium resist (+6,7%), the only one growing in the first four months of the year, driven by food and beverages (+8%) but above all by pharmaceuticals (+38,5%). The country is in fact a distribution hub for pharmaceutical products and headquarters of numerous multinationals. The two sectors are strong growth also in France (+8,2% and +40,4% respectively), where, however, they are not sufficient to compensate for the decline recorded in the other sectors.
While few countries in the world can claim to have been well prepared to deal with the health and economic consequences of the COVID-19 pandemic, a number of factors have made Latin American partners particularly vulnerable. Even before the pandemic, data from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) indicated that the region was facing a period of low economic growth: this contributed to fueling the discontent, which has translated into an increase in social unrest in many countries, most notably the wave of protests that swept the Andean region in 2019. Precarious economic conditions meant that even before the pandemic, governments in large parts of the region had very limited leeway to implement significant fiscal stimulus without compromising the long-term outlook.
At the level of groupings of main industries, it is consumer goods, in the January-April period, which better resisted the blow, however also entering negative territory (-5,8%). The contraction is mainly due to durable goods (-23,3%), while the decrease is slight for non-durable ones (-2,2%), confirming the lower exposure of the latter to the crisis given their essential nature. The drop in the export of capital goods was more marked (-19,9%), which suffer from the climate of uncertainty.
Exports of intermediate goods were also bad (-10,2%), still held back by the production blocks in place in various geographies and by the consequent interruption in various global value chains. Once again, pharmaceuticals recorded the best performance (+22,3%), especially in EU countries (+29,8%). More moderate growth in the non-EU area (+14,6%), where the very positive performances in some geographies such as Japan (+50,3%) and the USA (+40,3%) are offset by the declines in the United Kingdom (-8,6%) and China (-6,9%). The sales of textiles and clothing were particularly negative (-23%), especially in Switzerland (-28,7%), USA (-25,9%) and Japan (-20,6%).
According to analysts, the future of companies in the hardest-hit sectors such as transport, tourism, entertainment and retail will be determined not only by their financial ability to weather the storm, but also by the extent and form of state support during the pandemic. Many SMEs are unlikely to survive without access to credit or other forms of financial support; while companies in highly regulated sectors are exposed to significant contractual risks: those with contracts in the infrastructure sector, for example, are operating in a context of uncertainty as they are forced to renegotiate terms at a time when demand is collapsing. For example, in Colombia on 15 April the duration of contracts for the construction of infrastructures was extended to allow companies to remedy the serious, sudden loss of revenues.
Businesses operating in Latin America also have to consider a growing number of regulatory risks, with sector-specific rules being rewritten overnight by a political class rushing to support their electorate in times of economic difficulty. From energy companies in Chile struggling against a freeze on electricity tariffs (in effect since the October 2019 wave of protests), to pharmaceutical companies in Brazil that are barred from annual price hikes drugs; by the Argentine government that April 2 imposes a new freeze on the prices of food and medical supplies to the Peruvian one which at the beginning of May temporarily suspended the payment of motorway tolls.
However, the triggering causes of the 2019 wave of protests continue to exist and the ISPI analysis underlines how the social strata hardest hit by the economic crisis they will face austerity policies which most governments intend to adopt as soon as possible. In these conditions, protest activity risks re-emerging stronger than before as soon as citizens can return to the streets. On the one hand, social distancing, a consequence of the pandemic, has slowed the outbreak of new protests due to fears of the virus spreading. On the other hand, rioting and looting will continue to be significant risk factors throughout Latin America both during and after the pandemic. The real or perceived threat of shortages of medical supplies and supplies, as well as the failure to distribute aid during quarantine periods, will trigger further protests in the near term.
