Reducing costs and barriers to foreign trade in Central American economies is key for the region to overcome the economic recession caused by the outbreak of Covid-19.
A report prepared by the World Bank explains that boosting economic activity and employing a higher percentage of the labor force are objectives that can be achieved through reforms that strengthen the private sector and attract investment.
Salvadoran businessmen expect that at a local level the food, plastics and textile sectors will be the most affected by the increase in the prices of some raw materials and the prices of maritime freight.
This phenomenon has been announced for weeks. At the beginning of March, CentralAmericaData reported that due to the imbalance faced by world trade flows, shipping lines have changed their routes and prefer to move empty containers to Asia, a situation that generates shortages and causes increases in freight rates and raw material prices.
Although most activities in the country reopened at the end of August, hotel occupancy levels are still low and business people fear they will be forced to cut more jobs or close operations.
Promoting a risk management culture, defining possible scenarios by turning uncertainty into a variable and preparing to safeguard the company's operational continuity are some of the most important strategies for facing the coming year.
The pandemic that generated the spread of covid-19, caused changes in all business sectors and also generated an environment of uncertainty regarding the future of the economy.
The next U.S. president is not yet known, but in the region it is expected that in an eventual new Trump administration, the focus will be on the recovery of the U.S. economy, while an eventual Biden administration would focus on countering corruption and illegal migration.
Two days after Election Day took place, the United States is experiencing an atmosphere of tension and uncertainty, since because the results are closed, neither candidate can yet be declared the winner.
According to IMF forecasts, Panama and El Salvador are the economies that in 2020 will report the worst falls in their production, while Guatemala would be the country in the region that would emerge best from this economic and health crisis.
Due to the severe economic crisis generated by the covid-19 outbreak, the economic growth projections calculated by international organizations are not at all encouraging for Central America.
After the unemployment rate in the United States fell from 15% to 8% between April and August, it became evident that at the beginning of the crisis the capacity of recovery that the North American country could develop was underestimated and it is expected that this behavior could boost the economic activity in Central America.
During the first half of 2020, when the first cases of covid-19 began to be reported in the region, forecasts noted that the recovery of economic activity would be excessively slow, due to a significant drop in consumption globally.
Although the sector keeps its operations alive thanks to the packaging they produce for the food and cleaning industry, there is uncertainty among entrepreneurs as the demand for bags, brushes, tableware, furniture and other products has contracted.
As a result of the home quarantines that were decreed in the countries of the region in March 2020 due to covid-19, the outlook for the plastics industry fluctuates between optimism and uncertainty in market behavior.
As a result of the elimination of restrictions on productive activities in El Salvador, businessmen in the event organization sector are confident that meetings will begin to be held in the last quarter of the year.
Since March, when the first cases of covid-19 began to be registered in the country, the administration headed by Nayib Bukele decided to subject the country to a strict home quarantine.
After the reopening phases that were supposed to be applied in El Salvador were declared unconstitutional and the restrictions to economic activities were removed, businessmen receive the news with optimism, but fear that some businesses have closed down because of the crisis.
Since March, when the first cases of covid-19 began to be registered in the country, the administration headed by Nayib Bukele decided to subject the country to a strict home quarantine.
The World Bank projects that the Central American economy will contract by 3.6% this year, due to restrictions on movement, a decline in remittances and tourism, and a drop in agricultural prices.
The sudden and widespread impact of the coronavirus pandemic and the measures taken to contain it have caused a drastic contraction in the global economy, which, according to World Bank forecasts, will shrink by 5.2% this year, the bank reported on June 8.
When the local economy begins to return to normal, as isolation and mobility restrictions are relaxed, demand for health insurance is estimated to fall by 7%.
Using a demand/income sensitivity model developed by the Trade Intelligence Unit of CentralAmericaData, it is possible to project the variations in demand by Salvadoran households for different goods and services as the most critical phases of the spread of the covid-19 are overcome and the measures restricting mobility in the country are lifted.
New health and hygiene protocols in the establishments and the commitment to attract national tourists in an environment where short trips will be preferred, are some of the trends predicted in the new "normality" that will come after the quarantine period.
Given the quarantines decreed by most governments worldwide, it is anticipated that the habits of tourists will change dramatically in the short and medium term, as the crisis of covid-19 will leave consequences among consumers.
The sharp drop expected in the income of the tourism industry in Central America will be partially explained by the decline in hotel activity and tourist marinas.
The "Information System for the Impact Analysis of Covid-19 on Business", developed by the Trade Intelligence Unit of CentralAmericaData, measures the impact that the crisis will have on companies according to their sector or economic activity, considering various scenarios for the coming months.
In Central America, it is expected that the impact of the covid-19 crisis on the plastic product manufacturing business will be partly explained by the expected drop in sales of bottles and household products.
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