OBELA Analysis

Freight transport is very important to China's plans in Latin America and its continued global expansion. Land transport is vital to such an ambitious project as the New Silk Road, which seeks to grow world trade with China at the center.

In a context of trade and territorial dispute with the USA, China seeks to control more land routes in South America to move its goods more easily. This situation is one more example of the confrontation between Chinese and U.S. interests in Latin America.

It seems that China seeks an integration process in South America for its own benefit. The dispute is reflected in the development banks financed by each superpower and their percentage of participation in future constructions.

COVID induced a drop in production that left the world exposed to a financial crisis derived from the lack of income of companies when they have an accumulation of private debt and loss of profits.

Regarding new signs of financial fragility or instability in the region, derived from private sector problems, evidence shows that private external debt is more substantial than sovereign external debt in Latin America in the third decade of the 21st century.

High levels of private external debt could lead to a costly renegotiation process to reduce or restructure it. The question is whether this would be done by private agents or by the State as guarantor of the economic activities of the country.

The world economy came to a standstill during the second quarter of 2020, when different governments imposed various measures of productive shutdown and social distancing around the world. This caused aggregate demand and supply to grind to a halt, causing the European Union's GDP to fall -6.12%, the G7 -2.10% and Latin America -7.01%.

In the face of the COVID-19 crisis, fiscal and monetary stimulus was expanded in almost all Latin American economies, with the aim of boosting recovery, although not all countries responded immediately.

In Ecuador, Mexico and Paraguay, the implementation of a small economic package was accompanied by increased economic activity. The COVID-19 crisis has shown that the speed of GDP recovery led by foreign trade is faster in the context of falling imports.