Economies around the world are beginning to feel the impacts of the coronavirus, especially on manufacturing, agriculture and trade. While material prices are at historic lows, declining currency values and business shutdowns are deterring international business purchases. Here are the top stories and metrics the Leeco® Trading team is watching this month.

Market Metrics to Watch

Manufacturing PMI (as of March 2020)

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Brazil
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Mexico

Per data available on Tradingeconomics.com, Brazil and Mexico saw contractions in manufacturing PMI as the coronavirus pandemic spread. Brazil, in particular, saw supply chain disruptions that contributed to production backlogs as producers waited for imports to arrive.

Capacity Utilization (as of January 2020)

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Brazil
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Mexico

Capacity utilization increased for both Brazil and Mexico in January as compared to December 2019. The coronavirus was not very widespread until February, so future months’ capacity utilization is expected to decline.

Imports

Below is a chart showing import levels of key Latin American countries Mexico, Brazil and Chile, as of December 2019. Imports decreased in both Mexico and Brazil and increased in Chile.

Declining Car Production

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Brazil
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Mexico

Both Brazil and Mexico saw decreased car production in March, with Mexico’s production dropping 24.6% year-on-year. Brazil’s production declined 21.1% in March, year-on-year. Both declines are attributed to disruptions caused by the coronavirus.

Currency Depreciation

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Real Against USD (4/7)
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Peso Against USD (4/7)

The values of the real and peso are at historic lows as a result of government efforts to shield their economies from severe impacts of the coronavirus. This could lead to an increase in exports and profit margins but may also deter imports.

Executive Perspective

Antonio Rosset, Leeco Trading’s Commercial Director, shares his insight into the direction of the international trading market.

“We are seeing strong production levels from China as businesses reopen and return to normal operations. This puts downward pressure on global metals and chemicals prices, given immediate demand is low. However, businesses are reopening in Latin and South Americas, so we expect demand and prices to increase in the short-term. This is an excellent time to buy and take advantage of low prices while they last.”

In the News

There were endless numbers of important articles this week, but we collected our top four. For more timely news and insights, follow Leeco Trading on LinkedIn or Twitter.

Mexican Economy May Contract by 4-8% in 2020

The New York Times reported that Mexico’s Treasury predicted that the country’s economy will contract by as much as 3.9% in 2020 due to the COVID-19 pandemic, but private analysts say that number is low. Mexico will face two major challenges: an economic contraction in the United States, its largest trading partner, and oil prices that have fallen to about $10.60 per barrel for Mexican export crude.

Peru’s Stimulus Measures Being Rewarded in Markets

A recent article from Bloomberg took a closer look at Peru’s response to the coronavirus’ economic impact. The article stated that while Latin America’s two largest economies, Brazil and Mexico, debate pursuing large stimulus packages that could erode fiscal targets, Peru is going big with a stimulus package valued at 12% of the country’s GDP. Normally, such a move would unnerve investors, but trading so far shows they approve of it.

Brazilian Soybean Exports May Be Unaffected by Pandemic

S&P Global Platts reported that Brazilian soybean exports in 2019-20 crop year (September-August) could be unaffected by the coronavirus pandemic, as the world’s largest oilseed supplier has already sold 75% of the crop, according to market sources, with China the top buyer. Depreciating currency value in Brazil makes it attractive to international buyers and benefits farmers.

Coronavirus & Oil Price War Impacts on Latin America

While COVID-19 will have a serious detrimental impact on the economies of Latin America, the oil price war is a second economic blow for the region, reported Columbia University’s Earth Institute. Latin America will face a year of lower economic growth and weaker public finances. But the real problem is that the region has limited capacity to offset the external shocks with monetary and fiscal policies, darkening the outlook further.

It is widely known that the economic impacts of the coronavirus pandemic will be wide-reaching and deep. The road to economic recovery will be long, and no one can predict the path forward. Leeco Trading’s team is closely watching both economic indicators, which tell us how economies performed in the past, and policy news to better understand the future. We encourage you to contact our knowledgeable team with sourcing questions so we can help you find the ideal solution.