The “China effect” on commodity prices and Latin American export earnings

The COVID-19 pandemic has become a challenge for the global community and has led to a sharp downturn in the economies of many countries around the world. In January 2020, the IMF said that the world is heading towards a new Great Depression, as there is a trend similar to the situation of the 1920s. Hence, according to forecasts, the rate of economic growth in East Asia and the Pacific region by the end of 2020 will decrease to 0.5% and will reach the lowest level since 1967, being a reflection of the shocks associated with the pandemic. In China, extremely restrictive measures have led to an almost complete halt in business activity in some sectors and regions. China’s economic growth is expected to slow to 1% in 2020. Economic activity in the rest of East Asia and the Pacific region is projected to decline by 1.2% in 2020 and will recover to 5.4% in 2021. The economic consequences of the COVID-19 pandemic have had a detrimental impact on the countries of Europe and Central Asia, with the overall recession to 4.7% as forecasted for 2020. In the Middle East and North Africa, a 4.2% decline in economic activity is forecasted, because of the development of the pandemic and the collapsed oil market. In South Asia, as a result of measures to mitigate the effects of pandemics and collapse of global demand, have sharply fallen the volumes of industry, services and trade activities. The effects of the pandemic and the drastic fall in global commodity prices was a crushing blow for Latin American and Caribbean countries. A sharp slowdown in the economies of U.S. and China has disrupted supply chains to Mexico and Brazil and caused a stark drop in exports from Chile and Peru. The downturn in tourism has also had negative consequences. Such statistics confirm the opinion of many leading scholars in the world that the result of the COVID-19 pandemic will be a decrease in the level of hyperglobization of the world economy. In addition, a move away from U.S.-oriented globalization and a shift toward China-oriented globalization will also be likely.

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The Washington Consensus in Latin America

Oxford Research Encyclopedia of Politics ◽

10.1093/acrefore/9780190228637.013.1653 ◽

2019 ◽

Author(s):

Judith Teichman

Keyword(s):

Latin America ◽

Latin American ◽

Public Support ◽

Commodity Prices ◽

Washington Consensus ◽

Left Turn ◽

Reform Agenda ◽

Neoliberal Reforms ◽

New Policies ◽

Key Aspects

Washington Consensus policies evolved over time, both in Washington and among Latin American policymakers. These policies, involving trade liberalization and privatization (among other measures), were widely adopted in the region by the early 1990s. A generation of scholarly work sought to explain how and why Latin American countries embarked on economic reforms that governments had strongly resisted in the past. While many researchers focused on the top-down nature of the market-liberalization process, others called attention to its pluralist character and argued that the process had considerable public support. When the original Consensus ideas proved ineffective in promoting growth and improved living standards, technocratic Washington added new policies. By the early 2000s, Washington’s goal became that of reducing poverty while ensuring the completion of the original Washington Consensus reforms. In Latin America, however, there was a growing disillusionment with the original reform agenda and a strong challenge to key reforms. With the rise of social mobilization critical of neoliberal reforms and the election of left regimes challenging their main precepts, scholarship turned to a discussion of the nature of the new regimes and the extent to which their policies deviated from the Washington Consensus (both its original formulation and the later expanded version). While most scholars identify the left leaders of Ecuador, Bolivia, and particularly Venezuela, as offering the greatest challenges to neoliberalism, there is no consensus on the extent of the challenge to neoliberalism presented by Latin America’s left regimes. Research has also given attention to the rising demand of China for Latin American commodities as a key ingredient in the region’s left turn away from neoliberalism. The fall in commodity prices, however, set the stage for a resurgence of the political right, its business supporters, and the re-introduction of some key aspects of the original Washington Consensus.

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Fed move boosts tight Latin American monetary policy

Emerald Expert Briefings ◽

10.1108/oxan-db207557 ◽

2015 ◽

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Latin American ◽

Commodity Prices ◽

Content Type ◽

The Us ◽

Capital Outflows ◽

Government Bond Markets ◽

The Impact ◽

First Time

Subject The impact of US monetary policy tightening. Significance Following the US Federal Reserve's (Fed) historic decision to raise rates for the first time since 2006, the start of the Fed's monetary tightening cycle is accentuating the hawkish stance of Latin America's main central banks. This comes amid a dramatic sell-off in commodity markets, persistent concerns about China's economy and a severe deterioration in economic conditions across the region. Impacts EM asset prices have remained relatively resilient to the rise in US interest rates, in stark contrast to the 'taper tantrum' in 2013. Hitherto-resilient regional local currency government bond markets will face foreign capital outflows due to falling commodity prices. The Brazilian real is 2015's worst-performing major EM currency, but due largely to political and economic difficulties at home.

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Business confidence mars Chile investment outlook

Emerald Expert Briefings ◽

10.1108/oxan-db201656 ◽

2015 ◽

Keyword(s):

Interest Rates ◽

Latin American ◽

Commodity Prices ◽

Private Investment ◽

Political Stability ◽

Content Type ◽

Commodity Export ◽

Business Confidence ◽

Export Industries ◽

The Impact

Subject The impact of falling investment. Significance Since 2013, investment has been declining in many Latin American countries in a trend related to lower commodity prices. However, in Chile, the contraction has been particularly marked and is also attributed to a loss of business confidence caused by domestic political factors. Impacts An expected increase in international interest rates will play against higher private investment next year. Increased competitiveness as a result of peso depreciation may boost investment in some non-commodity export industries. Local businesses, accustomed to Chile's economic and political stability, will find it difficult to adjust to increased uncertainty.

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Forty Years in Crises: Understanding the Underlying Causes of Financial Crises in Latin America and How Coronavirus Positions the Region Today

Cyrus Chronicle Journal ◽

10.52212/ccj2020-v5i1m2 ◽

2020 ◽

Vol 5 (1) ◽

Author(s):

Kevin Murphy ◽

Ahmad Etebari

Keyword(s):

Latin America ◽

Interest Rates ◽

Latin American ◽

Financial Crises ◽

Political Instability ◽

Commodity Prices ◽

Precipitating Factors ◽

The Past ◽

Economic Decisions ◽

Underlying Causes

This paper is an attempt at identifying the causes and commonalities of financial crises in Latin America over the past forty years. This identification is carried out through an extensive review and analysis of the literature on the precipitating factors of 12 major financial crises in six major nations in Latin America. Through the literature review, we find three major commonalities among the Latin American financial crises: over-dependence on commodities, ineffective macro and currency policies, and overall political instability. Political instability is often the impetus for self-serving, politically motivated economic decisions, accentuating an existing crisis or contributing to a new one, such as the region’s current struggles with the Covid-19 pandemic. Our analysis show that these crises are associated with significant shifts in the commodity prices, exchange rates and interest rates.

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Latin American Political Economy: Making Sense of a New Reality

Latin American Politics and Society ◽

10.1017/s1531426x0000368x ◽

2014 ◽

Vol 56 (01) ◽

pp. 3-10 ◽

Cited By ~ 11

Author(s):

Juan Pablo Luna ◽

María Victoria Murillo ◽

Andrew Schrank

Keyword(s):

Political Economy ◽

Political Participation ◽

Latin American ◽

Identity Politics ◽

Demographic Transition ◽

Commodity Prices ◽

Democratic Consolidation ◽

Economic Transformation ◽

Making Sense ◽

American Political Economy

This brief article is designed to highlight an unfortunate discrepancy in the field of Latin American political economy. The field’s raison d’être has never been more compelling. Latin American societies have simultaneously been experiencing profound transformations—including democratic consolidation, demographic transition, and the growth of identity politics—and a palpable sense of déjà vu animated by the recovery of commodity prices and the return of populism. In a nutshell, the region is undergoing a deep economic transformation, which takes place in the context of unprecedented levels of political participation.

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