The most expensive Christmas ever

By Leonardo Oliva * / Connectas

Like every week, Víctor went to the supermarket near his home in Bogotá (Colombia) to buy the beer he likes. But his surprise was great when he noticed a very limited supply of brands on the gondola. Elizabeth, from Santo Domingo (Dominican Republic), has been using makeup products different from the usual ones for several weeks, which today are scarce in her country. Marcos, in Mendoza (Argentina), has been waiting five months for the new car that he bought and that he is already paying in installments. In the factory they always repeat the same thing to him: “There are no chips”, the vital semiconductors for the automobile industry.

Like them, millions of Latin Americans are beginning to suffer firsthand from a phenomenon that Americans are already experiencing since the beginning of this year: the shortage of mass consumer products. An anomaly that anticipates bad news: 2021 can be a scandalously expensive Christmas, the product of an alarming rise in prices as a result of shortages of merchandise.

For months there has been talk that, due to the pandemic but not only because of it, a perfect storm is hacking world trade. At the center of the problem is the so-called “container crisis”, a phenomenon that has broken the logistics supply chain from Asia to the rest of the planet. Just as the coronavirus with its unstoppable wave of infections showed the dark side of globalization, the global shortage of goods reflects once again that the fluttering of a butterfly in a port in China can be felt strongly anywhere.

The causes of this crisis converge in the Asian giant, today the great factory of the world. First, the pandemic. To contain the spread of the virus, the Chinese government isolated millions of workers, so many manufacturing industries had to close or work at half-speed. At the same time, the United States, its largest buyer, began to demand more Chinese products once its economy gained momentum again with vaccination. And so did Europe and Latin America, to a lesser extent. With low production at the origin and higher demand at the destination, the supply chain began to collapse in the middle of this year. And what seemed like a temporary situation will last several more months according to the optimistic forecasts of some experts consulted by CONNECTAS. Some even risk that it will reach 2023. So in our countries we will have to get used to half-empty gondolas or with less variety. And especially at higher prices, amid the general impoverishment left by the pandemic.

“We are experiencing the greatest crisis in maritime transport in history,” says William Cortés, agent in Colombia for the shipping company Seaboard Marine, who charts the severity of the problem: “There are ships with hundreds of containers in America standing still or waiting for shifts. to unload, as personnel are needed in maritime terminals as a result of the pandemic. This bottleneck for Latin America has also made the hub or the transshipment port in Panama, where most of the shipping companies coming from the Far East arrive, is also congested ”.

The lack of containers has caused their availability on ships to be priced at the price of gold. Since March, maritime rates have been growing steadily, and with them, the profits of multinational shipping companies. The Inter-American Development Bank (IDB) estimates that the freight of a container between Shanghai and South America, which before the pandemic cost about 2,000 dollars, today has risen to more than 7,000. “Critical economic indicators, low inventory levels, high season, congestion with lack of space and capacity, increased costs. It is the perfect recipe for maritime freight rates to continue increasing ”, summarizes Laura Montilla, director for Latin America and the Caribbean of the maritime logistics company Hillebrand.

Against this background, no one should be surprised by the shortages described at the beginning of this analysis. And this situation will worsen for the time of greatest consumption: Christmas. It is already lived by millions of Americans who see how Black Friday, the classic of every November 26, arrives this year with a lack of all kinds of products in the stores of Walmart, Amazon and other giants of mass purchases. “It is very likely that Christmas items will be scarce, because they will not arrive on time,” he told BBC Mundo Teddy Heinsen, president of the Association of Shipowners of the Dominican Republic.

“It’s going to be one of the most expensive Christmases in history,” insists Cortés, for whom not only toys made in China They will be less affordable and more expensive, but even replacing the old Christmas tree will seem like a mission impossible. The largest manufacturer of this product, Vietnam, had to close its factories due to the outbreak of the delta variant. In conversation with CONNECTAS, the Colombian shipping agent adds another problematic factor: “Large multinationals, such as Amazon, seeking a solution to supply the North American market, have decided to rent their own ships and have made the value of these ships exceed $ 8,000 daily at 70 or 80,000. This is increasing the final price of the products, which we end up paying each one of us ”.

With Christmas at our doorstep, the harsh rule of supply and demand is also hitting Latin American companies. In Nicaragua, Colombia or Brazil, for example, coffee producers are resigned as it is becoming increasingly difficult to send their beans abroad. Argentine oil and soy exporters have their shipments stranded in the port of Buenos Aires. The mining companies that exploit resources in Peru and Ecuador are experiencing something similar. And even Mexican automakers can’t get the supplies they need for the vehicles they sell to the world.

As Montilla defines it, “companies cannot reach foreign markets in a timely manner; then, there are delays, breaks in stock at destination and, unfortunately, higher prices due to high freight costs ”. And he exemplifies it with one piece of information: in August of this year, only 20% of the ships arrived on time in the Europe-Asia traffic. “The situation is expected to continue. No improvements or any kind of relief are foreseen in the short and medium term ”, concludes the Hillebrand executive. You are not alone in this pessimistic diagnosis. Rebeca Grynspan, secretary general of the United Nations Conference on Trade and Development, thinks the same: “I do not see in the short term that this situation will be overcome,” she told the newspaper. The country.

However, at one end of the supply chain and with record profits, shipping companies have no urgencies. They operate in a highly concentrated business where the top eight, organized into three alliances, control 85% of the world’s shipping capacity. But at the other extreme, that of consumers, the alarm lights go on before the rise in prices in the middle of the Christmas season. A situation in which, like the COVID-19 virus, there is no vaccine that can completely eradicate it. It only remains to be immunized so as not to succumb to it and understand that in Latin America it will be necessary to get used to not always getting the preferred brand. Victor, for example, had to buy, ironically, an imported and more expensive beer, since the barley that feeds the Colombian industry is stranded in some North American port. (O)

*Member of the editorial board of CONNECTAS.