At first, the latest economic forecasts for Latin America make you cry: They predict the worst slump in nearly a century. But they also contain some encouraging signs.
Let's start with the raw data. In a new report, the International Monetary Fund predicts that Latin American and Caribbean economies will fall by a whopping 5.2% this year, far more than the 3% global average.
Venezuela's economy will fall by 15% this year. Mexico's economy will shrink by 6.6% and the economies of Argentina, Brazil, Chile and Colombia will fall by 5.7%, 5.3%, 4.5% and 2.4% respectively this year, the IMF says.
A separate World Bank report released on April 12 projects that Latin American and Caribbean economies will fall by a combined 4.6% this year. The World Bank's average does not include Venezuela because of the lack of reliable data.
Many countries in the region will be hit simultaneously by a drop in China's commodity imports, the collapse of oil prices, a major decline of tourism and a fall in family remittances from Latin Americans living abroad. In other words, it will be a perfect storm.
Where's the good news?
First, this economic slump is likely to be much shorter than the world crises of 2009 and 1929.
Barring a second wave of coronavirus infections later this year, the global economy and Latin American countries should start getting back on their feet as early as July and grow in 2021. By comparison, the 1929 Great Depression lasted about 10 years, and the 2009 recession almost two years.
According to the IMF's projections, Latin American and Caribbean economies will grow by 3.4% next year and by an average of 2.7% between 2022 and 2025.
The World Bank estimates that Latin American economies will grow by 2.6% next year. Among those that will grow most rapidly are Peru, Uruguay, Chile and Colombia, whose economies are likely to expand by 6.6%, 5.5%, 4.8% and 3.4% respectively, it says.
Alejandro Werner, the head of the IMF's Latin America Department, told me that unlike what happened in 2009, or in 1929, the current crisis did not result from preexisting economic or financial troubles, but from an "induced coma-like situation in which the economy was intentionally brought to a halt to stop the COVID-19 contagion."
"This means that once we stop the spread of COVID-19, economies that were in relatively good shape before the crisis can recover more or less rapidly," he said.
Second, as Martin Rama, World Bank chief economist for Latin America, told me, Latin American and Caribbean countries have benefited from being among the last to get hit by the COVID-19 pandemic. That has given them time to learn from the experiences of hard-hit China, Italy, Spain and the United States, and to move faster to impose social distancing rules and, later, reactivate their economies.
Third, in the medium term, Latin American countries _ especially Mexico _ have a golden opportunity to take advantage of the post-COVID-19 global trade scenario.
U.S. companies, which are heavily dependent on supplies from China, are expected to move rapidly to diversify their supply sources. Many U.S. firms were left with virtually no supplies when China shut down its economy in February and March because of the pandemic.
"As companies are looking to make their supply chains more resilient, they're going to look away from China," says Eric Farnsworth, vice president of the Council of the Americas, a New York-based regional think tank. "That just gives a huge opportunity for Latin American and the Caribbean."
The challenge for Latin American countries will be to become more competitive, because U.S. multinationals may move exclusively to Taiwan and other highly competitive Southeast Asian countries, Farnsworth said.
Summing up, these bright spots do not obscure the fact that 2020 will be a horrible year for Latin America. But the pain may be shorter than in previous global crises, and there will be some opportunities for those willing to take advantage of them.
