economy
Pexels

The coronavirus that started in a city in China did not only affect the health aspect of its citizens, but has also affected China-linked economies most especially countries in Latin America. An example of this is Chile where they sell about a third of their exports to China.

According to Bloomberg, Chile is officially trying to offload its shipments like wines, cherries, and seafood somewhere in Asia after the outbreak of Coronavirus began. Chinese have purchases fallen 50 to 60 percent since then.

China also decided to shut down its ports and Chile, as one of the world's largest importers to China, has been affected by this and now the ships are lingering onshore. Chile's copper price has just recovered from a 14-day tumble tide.

China has played a moderate role in Latin American trade and became the region's largest trading partner in the past decade. At present, China is now the top importer of goods in Latin American countries such as Brazil, Peru, Uruguay, and Chile.

China's poor first quarter will negatively affect the economy of Latin American countries. In 2010, Latin America recorded its first lost in decades after they were affected by the violence and instability across the region.

Meanwhile, a UBS representative told a news outlet that they have already forecasted the economic growth of Brazil and slashed its economy from 2.5 percent to 2.1 percent due to the effect of the coronavirus.

Pepe Zhang, who leads China-Latin America research at the Atlantic Council, said: "Latin America, in terms of regional growth, had the lowest of all the regions in the world last year. In this context, we also have the coronavirus situation, so it seems like external forces are not exactly favorable."

Andres Abadia also echoed, he works in a research firm as a senior economist for Latin America Pantheon Macroeconomics, that the Chinese slow down could affect Latin America. Abadia said: "We have to expect a big hit to Chinese demand for Latin American goods, particularly commodity prices, and disruption to China-based supply chains for a couple of months, at least, so we await the next round of business surveys from [these] countries with a degree of trepidation."

In an email that he sent to Quartz, Abadia highlighted how Latin American countries like Chile and Peru will be affected because these countries depend on the commodity exports that are coming from China. He also added that Brazil and Mexico could also be affected because of lower commodity prices and slower manufacturing globally.

Abadia wrote in his set email, "A big risk for Latin America is that China's first-quarter results could turn out to be a write-off, which would hit already weakened business sentiment."

Investors were also wary about putting money in Latin American countries after China struggled in global markets in late January because of the coronavirus. Latin American countries have suffered in terms of their indexes compared to its many counterparts in Europe.

Moreover, Ernesto Revilla, head of Latin America Economic Research, said: "The initial selloffs were driven mainly by an urge to move out of risky environments, bolstered by falling commodity prices and fears about Latin America's exposure to China."

He also added that "Latin America is in a difficult spot where it's not obvious where to find a new model for growth-and investment is very weak in the region. China is playing an important role in many countries in Latin America, but a slowdown in China will decrease the level of investment from China to these Latin American countries."

Abadia said that to drive growth in countries in Latin America they need to boost spending in infrastructure and have some reforms in areas like labor markets, ease of doing business, and diversify away from commodities.