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Latin America begins to feel the effects of the global shortage

Fertilizers for the powerful Brazilian agricultural industry, semiconductor chips for Mexican automakers or lack of ships to export Colombian coffee: Latin America is also beginning to feel the effects of the global supply crisis.

Although the situation is not critical, as in the United States, where the Christmas season is threatened, the supply chain in some Latin American countries is beginning to stress, as the region is purely an importer and depends on world trade.

Since restrictions on mobility and economic activity began to be relaxed by the COVID-19 pandemic, the demand for goods and services has experienced a sudden growth that manufacturers and carriers have not been able to respond to, which It has generated bottlenecks in different parts of the world, especially in Asia and the United States.

Here is a summary of the current situation in the large Latin American economies.

Brazil

The collapse of Asian ports is impacting Brazil, the great Latin American economy and one of the world’s largest food exporters, since fertilizers for agribusiness come mostly from China, its main trading partner.

It is also being affected by the embargoes imposed by several countries on Belarus, one of the largest exporters of potassium, the raw material for making fertilizers, said Luis Eduardo Rangel, special advisor to the Ministry of Agriculture and Livestock.

Although the analyzes “do not indicate an immediate crisis“, The effect could be felt in the 2021-2022 harvest, so Brazil is closing contracts with other suppliers to reduce a possible shortage, said Rangel.

According to the Parliamentary Agricultural Front, the container crisis already had a negative impact of US $ 1 billion on agricultural exports between last May and August.

The crisis will normalize in a maximum year and a half and then there will be more than enough containers”, Highlighted Roberto Gusmao, president of the Port of Suape (northeast), one of the main in the country.

In some cities, some products are also becoming scarce, such as Chinese toys, and several car factories have had to slow down their operations due to a lack of parts, such as semiconductors.

Mexico

The shortage of semiconductor chips is most acute in the powerful Mexican automotive industry, the main component of industrial GDP, and specialists point out that it could largely explain the 0.2% quarterly drop in Gross Domestic Product (GDP) between July and September.

We are very vulnerable, as we import many products, not only from China, but also from the United States.”Said Pablo López Sarabia, professor at the Tecnológico de Monterrey.

Mexico, he added, is also suffering a “double impact”: in recent times it has faced teacher blockades due to salary demands on the railways of the western state of Michoacán, affecting access to the Lázaro Cárdenas port, key to the Pacific.

Apart from the automotive sector, retail is also being hit and there is a certain lack of products that were in high demand in the pandemic, such as bicycles.

The central bank of Mexico attributes to these factors part of the rise in inflation, which stands at close to 6% so far this year, double the official goal.

Studies indicate that supply chains will not surely recover until almost the end of 2022, when it begins to normalize”Warned Professor López Sarabia.

Colombia

Colombians may have trouble finding some Christmas gifts such as toys, spirits, electronics and household appliances, but what they will mostly feel is an increase in prices, according to specialists.

Shortages help to increase prices, but the biggest impact is on logistics costs that have risen dramatically”, Declared the president of the National Association of Exporters of Colombia (Analdex), Javier Díaz.

A container that was usually brought from China at a cost of US $ 2,200, today costs between US $ 20,000 and US $ 22,000: “The costs have multiplied by ten and that is not going to be borne by the seller“, he claimed.

For the expert, the solution in Latin America may take even longer than the rest of the world: “We are barely 4% of the shipping companies’ business, we are not a priority. At least throughout 2022 we will have this complicated logistics and high costs”.

Congestion in ports such as Los Angeles, in the United States, has also affected exports and an operation that took 40 days today is taking 75.

For that reason, Díaz specified, many operations, mainly coffee and sugar, were transferred to Cartagena, in the Caribbean, “to try to meet commitments”, He specified.

Argentina

In Argentina, the companies that are suffering from a lack of inputs are the warehouses, the automotive companies, the manufacturers of electronics, footwear and agricultural machinery.

Marcelo Elizondo, international economic analyst and president of the Argentine chapter of the International Chamber of Commerce, indicated that the most affected are SMEs.

The lower supply of freight and the higher transport prices imply a “aggravation“Of the problems to import in Argentina, where licenses and foreign exchange are already restricted, said Elizondo.

If Argentina has “dollar output increments“Because it has to pay the increased cost of logistics services,”there will be a currency impact”, He explained.

This, he added, could force the Government to “squeeze imports even harder“And that the economy, which in 2020 celebrated three years in recession,”cannot be recovered”.

The rising cost of maritime freight is also affecting exports that go to Asia —the most important continental market for Argentina—, which for Elizondo can make the South American country “lose profitability”.

Chile

In Chile, the pressure is not so much on the availability of products, but on inventories and waiting times, especially in durable goods, said George Lever, Studies Manager of the Santiago Chamber of Commerce (CCS).

There is a very strong increase in the entire supply chain, from productive inputs to the historic increase in the cost of maritime freight”, He alerted.

This has led to a sharp rise in prices, especially in segments that operate with lower margins such as high-tech, furniture, automobiles, power tools, stereos and microwaves.

In the case of Chile, in addition to the reactivation of demand and supply problems due to congestion in production chains, we have the effect of abundant liquidity in households due to early withdrawals of pension funds and the recent strengthening of the fiscal transfers”, He concluded.

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