Relatively large human toll is evident from the number of cases; with only 8.2 per cent of the world population, the region had 28 per cent of cases and 34 per cent of deaths, by end-September. As the countries started to dismantle the restrictions despite the spread of the virus, the impact on the region’s Fiscal solvency, Growth, and Stability became alarmingly conspicuous. The LAC region is experiencing the biggest contraction in the emerging markets and developing economies. The IMF World Economic Outlook has reported a GDP contraction of 8.1 per cent in Latin America in 2020. Unfortunately, since 2014, the region has been experiencing the weakest period of growth since 1950. Therefore, this recent GDP contraction comes as a severe blow to a déjà dwindling economy, exacerbating the health infrastructure and, consequently, social conditions. Making matters worse is a sharp decline in global demand, a considerable reduction in commodity prices, financial volatility, and additional impacts associated with lower investment, reduction in tourism, and a potential decrease in remittances compounds an ever-complex scenario. The restrictions in economic activities caused by the pandemic are having a dramatic socio‑economic impact on the most vulnerable groups. Close to 60% of workers in LAC are in the informal sector and many are self-employed in a subsistence, daily living economy, and thus are at the risk of slipping back into poverty; increasing unemployment to 13.5% at the end of 2020.
The current contraction is, however, caused not only by falling prices but also by a decline in export volume. The global reduction in the total volume of international trade in 2020 is estimated to be 13% to 32%, which is mainly explained by the slowdown in consumption and economic activity in China, the United States of America (USA), and Europe. The volumes of Latin America’s commodity exports are most affected by the strong decline in demand from their principal trading partners; China and the USA. This reduction is caused by reduced travel and demand for fuel, as well as by the closedown of the Chinese manufacturing and technology industries, which use a large percentage of the metals mined in Latin America. Another impact of the COVID-19 crisis that may affect commodity chains in both the short and the long term is the decline in foreign investment and the fact that many planned investments by multinationals have been put on hold. Since the start of the pandemic, the global value of cross border mining deals has gone down by 32%. In Peru, market analysts expect a 10-30% reduction in mining investment in 2020. The London-based mining giant Anglo American has delayed a US$1.5bn investment in the development of the Quellaveco copper mine in the Peruvian highlands. There are also alarming reports about high levels of capital flight across the region. The figures available for Colombia, reports that foreign investors redirected US$115.7m out of the country – representing about 16% of their total investment portfolio in Colombia.