The manufacturing sector is beginning to stabilize in key Latin American countries, and economic recovery in the region is expected to continue improving through the remainder of 2021. However, supply chain constraints, raw material shortages and inflation concerns could dampen growth outlooks and increase manufacturing production costs.

The Leeco^® Trading team is ready to assist manufacturers with international commodity sourcing to help control production costs. Contact us today to request a quote or learn more about our services.

Manufacturing PMI in Brazil fell month-over-month during April 2021 as factory output and new orders stagnated. Manufacturing PMI in Mexico rose month-over-month during April 2021, marking the smallest contraction in factory activity in 14 months.

Capacity utilization in both Brazil and Mexico increased month-over-month during March 2021, marking the highest capacity utilization rate in nearly a year for both countries.

Below is a chart showing April import levels for Mexico, Brazil and Chile. Imports to Mexico, Brazil and Chile all sharply declined month-over-month.

Car production fell in both Brazil and Mexico during April 2021, decreasing 4.7% and 11.5% month-over-month, respectively. The ongoing global semiconductor shortage continues to disrupt car production supply chains in the Latin America region.

Mexico’s GDP grew 0.4% quarter-on-quarter during the first three months of 2021, beating expectations. However, this was the slowest growth rate since their economy started recovering due to gas shortages from February’s deep freeze in the southern U.S.

Leeco Trading’s Commercial Director, Antonio Rosset, shares his insights on how supply chain constraints are impacting the ability of Latin American manufacturers to source raw materials.

“While we are seeing the manufacturing sector continue to improve in Latin America, rising raw material costs and supply chain constraints still pose a risk to manufacturers and could impact production costs. To keep their supply chain running smoothly while controlling raw material costs, it is important that manufacturers in the region consider international sources for the raw materials. Our team is ready to assist customers in sourcing metals and fine chemicals at a competitive cost.”

Antonio Rosset, Commercial Director

Recent economic news points towards stabilizing economies, but raw material shortage and inflation concerns remain in place.

Economic activity in Brazil fell 1.59% month-over-month in March, smaller than a forecasted decline of 3.75%. However, this smaller-than-expected decline means that the economic activity index rose 2.3% during the first three months of 2021 compared to the last three months of 2021. Analysts say this quarter-over-quarter growth in economic activity likely means that Brazil’s GDP grew in Q1 2021.

Mexico’s IHS Markit Manufacturing PMI increased month-over-month in April to reach its slowest contraction pace since the start of the COVID-19 pandemic, indicating tentative signs of manufacturing sector recovery. Despite signs of stabilization, however, experts say raw material shortages and supply-chain constraints could soften output and new orders.

Brazil consumer inflation rose to 7.3% in mid-May from 6.2% the previous month, marking the first time since 2016 that inflation reached a rate above 7%. However, the monthly rate of inflation in May was 0.44%, the slowest rate for any month since August of last year. While Brazil’s central bank stated that their year-end inflation goal is 3.75%, economists believe 2021 inflation will be at a rate of 5.2%.

According to consulting firm AlixPartners, the ongoing semiconductor shortage is expected to cost the global automotive industry $110 billion in revenue in 2021 and cause a production loss of 3.9 million vehicles. Analysts expect production losses to be the worst in Q2 of 2021 and gradually improve through the remainder of 2021, with the semiconductor shortage expected to resolve in 2022.