The manufacturing sector and economic recovery outlooks remain uncertain in key Latin American countries amid rising COVID cases and inflation concerns, which are dampening demand and output. Increasing ocean freight costs are also creating material sourcing concerns for manufacturers in the region, leading many to turn to international trading partners for assistance in sourcing the commodities they require.

Leeco^® Trading is prepared to assist manufacturers in sourcing the commodities they need during this uncertain market. Contact our team today to request a quote.

Brazil’s manufacturing PMI fell month-over-month in March 2021 as resurging COVID infections caused a weaker expansion of the manufacturing sector. Mexico’s manufacturing PMI rose month-over-month in March 2021, marking the smallest manufacturing sector contraction in a year.

Capacity utilization decreased month-over-month during February 2021 in both Brazil and Mexico as production slowed amid economic uncertainty.

Below is a chart showing March 2021 import levels for Mexico, Brazil and Chile. Imports to Mexico, Brazil and Chile all surged month-over-month.

Car production in Brazil rose 1.7% month-over-month in March 2021, reaching its highest level since October of 2020. Car production in Mexico jumped 12.5% year-over-year in March 2021 and also increased month-over-month.

The Brazilian real appreciated more than 1% during the last week of April 2021 amid expectations of improving economic conditions in the coming months. The Mexican peso retreated to a three-week low during the last week of April 2021. Currency values above are as-of 4/29/2021.

Leeco Trading’s Commercial Director, Antonio Rosset, shares insights on how rising ocean freight costs are impacting raw material sourcing in Latin America.

“As demand for raw materials rises amid economic recovery and an ocean freight container shortage persists, we are seeing barge freight rates increase. These increases are expected to continue into the summer, and some experts believe rates could remain high for some commodities even longer. With ocean freight rates on the rise, it is more important than ever for Latin American manufacturers to partner with an international trading partner to help negotiate fair rates. The Leeco Trading team is prepared to help customers navigate this challenging shipping environment.”

Antonio Rosset, Commercial Director

Recent economic news points towards mixed economic and manufacturing activity across key regional markets.

While Brazil’s economic growth appears to be on track for completing a “V-shaped” recovery during the second quarter of 2021, factors such as increasing COVID cases and inflation continue to threaten recovery outlooks. According to economists, Brazil’s inflation spike could peak at 7.5% next quarter, which may slow expected economic growth. Some experts, on the other hand, remain more optimistic, stating that progress in vaccinations and possible fiscal reform could boost recovery.

Mexico’s economy shrank more than expected in February, according to national statistics agency INEGI, driven by weak manufacturing and service sectors. Mexico’s economy shrank 5.1% year-over-year in February, greater than expectations of a 4% decline. On month-over-month terms, the economy shrank 0.3%, marking the third consecutive monthly decline.

Latin America is facing a COVID vaccine shortage, which could threaten economic recovery in the region as citizens struggle to get vaccinated. Latin American officials faced difficulties securing available doses, and the global COVAX program to supply vaccines to poorer countries faced production glitches. The IMF warned that slow vaccine rollout and resurgence of cases could “cast a shadow” on Latin America’s near-term economic recovery prospects.

Annual inflation in Brazil rose above 6% in March for the first time in four years, lifted further upwards by spiking fuel prices. The annual rate of consumer inflation rose to 6.1% in March from 5.2% in February. Currently, inflation is well-above the central bank’s year-end goal of 3.75%.