Post-pandemic economic recovery is occurring steadily throughout Latin America, but some countries are fairing better than others. Recovery coupled by disruptions in supply chains are contributing to material shortages, longer manufacturing lead times and higher commodity prices. During this time of recovery, it is critical to work closely with your international trading partner to ensure you have the materials you need, when you need them. Contact us today for a consultation with one of our expert team members.

Rising demand, increasing job creation and raw goods price increases are fueling a record increase in the manufacturing purchasing managers index (PMI) in Brazil rising to 64.7 in August, up from 58.2 in July. Mexico’s recovery, however, is proceeding at a significantly slower pace, with the manufacturing PMI still at a level of contraction at 41.3, but is steadily increasing.

Capacity utilization rates in Brazil and Mexico continued their large climbs for the second month in a row. Brazil’s capacity utilization rate hit its low in April, at 66.6, but increased in May (70.5), June (72.5) and July (75.4). Mexico’s recovery was slower, rising from 45.4 in May to 66.2 in June and 72.9 in July.

Below is a chart showing import levels of key Latin American countries Mexico, Brazil and Chile. Currency devaluations of the Brazilian Real and Mexican Peso, in particular, have had a negative impact on imports. Chile, too, experienced currency volatility earlier in the year, but has since stabilized.

Given the global economic disruptions caused by the COVID-19 pandemic, our team has found this Trend Economy tool to be helpful in understanding the past, present and future of metals and chemical trading.

Antonio Rosset, Commercial Director of Leeco Trading, regularly monitors important market indicators to help customers make strategic sourcing decisions and shares what he is watching in the near future.

“We saw upward pressure on prices for both metal and fertilizer commodities as a result of increasing demand and supply chain challenges. Manufacturers, especially those in Brazil, have unusually long lead times because of the difficulty in acquiring raw materials. We do not expect this to change in the short term and are encouraging our customers to place orders as soon as they are able.”

Antonio Rosset, Commercial Director

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

The global economic outlook is not quite as dark as expected even just three months ago, a top International Monetary Fund official said this month, citing better-than-anticipated economic data from China and other advanced economies.

However, IMF spokesman Gerry Rice told reporters the overall global outlook remained challenging as a result of the coronavirus pandemic and its impact on many economic sectors.

The situation remained “precarious” in many developing countries and emerging markets other than China, he said, noting that the IMF was also concerned about rising debt levels.

In a lengthy report, the Progressive Farmer highlighted many factors contributing to rising fertilizer prices. In particular, they stated that the supply flow of international phosphates continues to stay tight. Disruption of supply from Tunisia has benefitted Morocco, who has turned its attention from the U.S. to Europe and the wider world market. India continues to drive world prices higher, particularly on DAP. Markets in the Western Hemisphere are exhibiting less demand, but with overall supply tight, buyers that require product are bidding up the market against a platform of tight supply. Read the full report here.

Brazil’s bumper coffee crop is starting to translate into record shipments as growers capitalize on the local currency’s slide against the dollar, according to one of the world’s largest traders of the commodity.

Green coffee exports are expected to top 3.5 million bags this month, which would be the highest ever for September and the most since December 2018, said Carlos Alberto Fernandes Santana, a director at Empresa Interagricola SA, a unit of trader Ecom Agroindustrial Corp. Shipments are on track to hit a record in the three months through November after falling in August, he said in an interview.

The divergence between Latin America’s two largest economies, Brazil and Mexico, is widening as the region’s most prominent left- and right-wing leaders adopt stridently different fiscal responses to the COVID-19 pandemic, according to a Bloomberg News article.

Their approaches, however, are not what would be expected – and investors are adapting accordingly.

The right-wing administration of President Jair Bolsonaro – which came to office last year pledging to lower public spending and cut Brazil’s debt – has opened the taps and spent billions on unemployment benefits.

Meanwhile, in Mexico, President Andres Manuel Lopez Obrador’s left-wing government – which promised to tackle poverty with state spending programs – has kept an iron grip on its purse strings.

The short-term economic impact of this fiscal divergence was reflected in the data. While Brazil’s economy shrank by a record 9.7% in the second quarter, Mexico’s plunged by a staggering 17.1%.