Manufacturing and production activity are slowly on the rise in Latin America. However, 2021 economic recovery outlooks remain uncertain in key regional economies, leading more manufacturers to consider sourcing raw materials internationally to help control production costs.

The Leeco^® Trading team will continue to watch key market metrics in the Latin American region to gauge impacts on raw material sourcing and pricing. Contact our team to learn more about our international trading services and request a quote for the raw materials you need.

Brazil’s manufacturing PMI fell to 56.5 month-over-month in January 2021, marking the smallest expansion in the sector since June 2020. Mexico’s PMI rose month-over-month in January, but is still at a level of contraction.

Capacity utilization increased month-over-month in both Brazil and Mexico during December 2020, marking an increase in factory production.

Below is a chart showing January 2021 import levels for Mexico, Brazil and Chile.  Imports to Mexico, Brazil and Chile all fell month-over-month as purchases of consumer and intermediate goods declined.

Brazil’s car production fell 4.6% month-over-month in January, the second straight month of auto production declines. Mexico’s car production dropped 15.1% year-on-year in January. A shortage of semiconductors across the globe contributed to production slowdowns.

Mexico’s GDP fell 8.5% in seasonally adjusted terms during 2020, according to an estimate released by statistics agency INEGI. This contraction was the sharpest GDP drop that Mexico has experienced since the Great Depression in the 1930s.

Leeco Trading’s Commercial Director, Antonio Rosset, shares his insights on how economic volatility may impact the way manufacturers in Latin America source raw materials.

“Economic and manufacturing outlooks remain uncertain across Latin America, leading many manufacturers to consider the most cost-effective option for their raw material needs. By considering international sources, manufacturers can cut production costs while still sourcing high-quality materials. Leeco Trading partners with a variety of metals and fine chemicals producers worldwide and can help businesses source the raw materials they need.”

Antonio Rosset, Commercial Director

Recent economic news points towards mixed economic and manufacturing activity across key regional markets as 2021 outlooks remain uncertain.

Factories across parts of northern Mexico reported $2.7 billion in losses from rolling blackouts that impacted the region due to limited natural gas supplies from Texas, which was undergoing a rare winter freeze. While regions bordering the U.S. were the main locations impacted by blackouts, some regions further south were also forced to temporarily shut factories down.

The outlook for Brazilian interest rates in 2021 rose to 3.75%, the highest forecast since May 2020. High inflation, along with a weak fiscal outlook, are expected to push Brazil’s central bank into tightening its fiscal policy. While the interest rate is currently at 2%, economists believe the tightening cycle will begin sooner than expected.

The Development Bank of Latin America announced that it launched its largest bond issue ever – $1.52 billion – to support economic recovery in countries impacted by the COVID pandemic. The bank, which gives credit to countries across the region and is backed by 17 Latin American and Caribbean countries, placed the bonds with a term of 5 years and a coupon rate of 0.25%.

According to a UBS Global Wealth Management executive for Latin American business, an expected increase in U.S. infrastructure and economic stimulus spending will help boost manufacturing in Mexico by increasing export demand. Changes to the USMCA, which will help create a stronger environment for private investments and supply chains, are also expected to boost Mexico’s economy.