Latin America Faces Historic Economic Contraction

Latin America appears to be heading toward its worst economic downturn in more than a century, according to a World Bank forecast.

A big part of the slide is a significant slowdown in commodity exports.

A July 1 Bloomberg article provides details. Here's an excerpt:

The World Bank projects the recession in Latin America and the Caribbean will be the worst downturn since reliable data began in 1901...

The development institution expects a gross domestic product contraction of more than 7% for 2020, making it worse than any crisis of the past century, including the Great Depression, the 1980s debt crisis and the global financial of 2008-2009...

The drop in commodity exports based on a plunge in demand in advanced economies, coupled with the collapse of tourism, is hammering the region, [said the president of the World Bank].

"It hits the poor and vulnerable the hardest through illnesses, job and income losses, food supply disruptions, school closures and lower remittance flows," [said the World Bank president]. "The poverty rate, which had been falling since the early 2000s, will go up significantly as tens of millions of people lose their jobs."

Back in August 2019, well before Covid-19 became big news, Elliott Wave International's monthly Global Market Perspective discussed the prospects of a big slump in the worldwide demand for commodities.

Here's a chart and commentary:


This chart showing the decline in worldwide commodity prices makes a further mockery of the efforts of central banks to induce inflation. In fact, the CRB index peaked at an all-time high of 471 in July 2008, and, after a countertrend peak in 2011, the index sank nearly 60% into its February 2016 bottom. Over the course of 2019, crude oil prices have dropped more than 17%. Natural gas prices are off nearly 20%. And propane prices have plunged an incredible 47%. The CRB index has traded sideways over the past two years, but it's probably the calm before another storm. As economies stagnate, worldwide demand for commodities will dry up... [emphasis added]

Here, in July 2020, EWI's analysts anticipate deeper economic downturns for global economies.