Economic outlooks for 2021 continue to improve in Latin America as manufacturing and economic indicators in key regional countries, such as Brazil, stabilize and grow. However, raw material shortages and slow COVID-19 vaccination progress could dampen outlooks for the remainder of the year, and economic outlooks for the region are cloudy for 2022 and beyond

The Leeco^® Trading team is ready to help manufacturers source the raw materials they need amid growing demand. Contact us today to receive a quote or learn more.

Brazil’s manufacturing PMI increased month-over-month in May 2021 as output and new orders accelerated. Mexico’s manufacturing PMI decreased month-over-month, marking the 15^th straight month of contraction, as raw material shortages slowed production.

Brazil’s capacity utilization increased month-over-month in April 2021 as factory production increased. Mexico’s capacity utilization, however, decreased month-over-month.

Below is a chart showing May import levels for Mexico, Brazil and Chile. Imports to Mexico, Brazil and Chile all rose steadily month-over-month.

The Brazilian real traded at its highest level since June 2020 during the fourth week of June, after metrics showed that consumer inflation surged during the first half of the month. This suggests that Brazil may further tighten monetary policy in the coming weeks. The Mexican peso, however, held steady during the fourth week of June. Currency values are as of 6/25/2021.

Brazil’s economy grew 1.2% quarter-over-quarter during Q1 2021, marking the third consecutive quarter of growth. Strong growth in the service sector and business investments, in particular, brought the economy back to its pre-pandemic size. Experts say this quarterly growth indicates a positive economic outlook for Brazil in the coming months.

Leeco Trading’s Commercial Director, Antonio Rosset, shares his insights on how economic growth outlooks could impact raw material demand in Latin America.

“World Bank’s latest outlook for Latin America indicates improving economic growth for the remainder of 2021. We are also seeing manufacturing output rise in countries like Brazil, and this could cause demand for raw materials in the region to increase. However, controlling production costs will likely remain important to manufacturers for some time, especially as economic outlooks for 2022 appear more volatile. Leeco Trading is prepared to assist customers with their growing metals and fine chemicals demand and place a focus on helping them to control costs.”

Antonio Rosset, Commercial Director

Recent economic news points towards economic outlooks improving in Latin America, but inflation rates will likely remain a concern.

Mexico’s central bank voted by a majority to raise the interest rate benchmark to 4.25% during their June 24^th meeting. The bank stated the interest rate increase was necessary to “avoid adverse effects on inflation expectations.” Economic analysts were surprised at the hawkish tilt but said the increase was necessary to help anchor inflation expectations for the remainder of the year.

Brazilian consumer inflation continues to rise and reached an annual rate of 8.1% in mid-June, the highest rate in nearly five years. June’s monthly inflation rate was almost double what it was in May as well, at a rate of 0.83%. Brazil’s central bank raised its interest rate benchmark to 4.25% to help keep inflation in check, and analysts state that more aggressive rate increases could be coming in their near term. Currently, Brazil’s central bank has a year-end interest rate goal of 3.75%.

S&P, a global ratings agency, raised its economic growth forecast for Mexico to 5.8% in 2021 and 2.9% in 2022. The agency stated that it raised its outlooks due to the U.S. economy’s strong recovery, which is benefiting Mexico via remittances and manufacturing exports. However, S&P warned that economic recovery will likely be uneven due to limited stimulus measures.

The World Bank stated that the Latin American region will face “modest” economic recovery following a sharp economic contraction from the COVID-19 pandemic. While they raised regional economic expectations to a 5.2% increase, World Bank said this growth will depend on vaccination progress, an increase in raw material prices and the relaxation of restrictive measures. The firm also predicted that Latin America GDP would decline by 2.9% in 2022, saying the pandemic left a severe economic impact on the region that will take a few years to recover from.