OBELA Analysis

Since the recognition of the COVID-19 outbreak in December 2019, several measures of social isolation, suspension of activities and productive unemployment have been implemented. The impacts it has generated have put the world economy in a perspective of economic and social crisis even more complicated than that expected at the end of 2019.

The scenario for Latin America prior to the outbreak of COVID-19 was very complicated. ECLAC recognized in December 2019 that the region was showing a generalized and synchronized economic slowdown.

The virus, in addition to representing a serious global health crisis in itself, had exposed the deep structural limits of the world economy and revealed the vulnerabilities of the accumulation model based on the free market and global production chains.

On December 31, 2019, the coronavirus (COVID-19) appeared in Wuhan, China. While this explains the speed of the stock market fall, it is not enough to explain why it resembles the experience of the 2008 - 2009 crisis.
The impact that has been presented cannot be understood without understanding the importance of China in global value chains. China is the source of 5 branches of the world economy: pharmochemistry, automotive, aeronautics, electronics and telecommunications.
What is certain is that the uncertainty about the dynamics of the real economy has impacted on the expectations in the stock markets and on economic growth in the world. The reactivation of production, whenever it occurs, will be slower than the previous dynamics.

China's expansion in Latin America is not limited to trade, investment and clean energy, as financing in the region is increasingly important. There are two forms of financing for Latin America from the Chinese giant: commercial banking and development banking.

Between 2005 and 2018, there is a total of $141 billion in loans to Latin American countries. The loans to Latin America are mostly energy projects (69%), including hydroelectric plants in Ecuador, the solar park in Jujuy and oil production in Brazil and Venezuela.

China reaffirms its interest in the region with the expansion of financing to Latin American countries, and its search for hegemony takes another step forward by financing and building projects that help the New Silk Road located in Latin America.