Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
<span/><span/>Latin America is
increasingly becoming an epicenter of the global coronavirus
(COVID-19) disease 2019 pandemic. The shock on the region's
economies is worsening, in turn depressing energy consumption.
COVID-19 hits Latin American economies that are already
weakened, with already dampened energy demand growth expectations.
Mexico's economy stagnated in 2019 amid policy uncertainty, Brazil
is shaking off years in the doldrums, Argentina is trying to
refinance its massive debt, and Chile recently endured nationwide
social protests.
South America's industrial sector is energy intensive and highly
dependent on mainland China. Mainland China—one of the markets
hit hard by COVID-19—accounts for 30% of Brazilian exports,
represents Argentina's second-largest trading partner, and is the
main offtaker for Chile's prominent mining industry. Demand from
the three countries' industrial base—representing more than 40%
of both gas and power total demand—is highly elastic to GDP.
This situation is exacerbating the energy consumption impact of the
economic slowdown.
Meanwhile in Mexico, gas and power demand are tightly linked to
industrial activity, which in turn is battered by cuts in oil
production and by the unprecedented economic downturn in the United
States. Furthermore, the worst of the direct impacts of COVID-19 on
Mexico's economy are likely yet to come.
<span/>Already, power
consumption from the six largest economies of Latin America has
dropped almost 12% since each country started its quarantines,
compared to the same periods of last year (see figure below).
IHS Markit identified and is monitoring factors that
particularly impact Latin America's gas and power needs,
including:
Ongoing fallout in the economies of mainland China and the
United States, the main outside trading partners of Latin American
countries
The capacity of Latin American governments to stay in front of
the COVID-19 spread, for example in Brazil and Mexico
Government responses towards low oil and gas prices in Brazil,
Mexico and Argentina (such as new support to private investment
versus greater state involvement), which also disrupt trade
balances (for example Mexico's dependence on US gas)
The governments' balancing acts between improving the economic
situation of their populations and implementing retrenchment
policies to address debt, especially in Argentina
The governments' abilities to pass new reforms to foment
investment, especially in Brazil
Possible freezes in power and gas tariffs to end consumers,
such as in Argentina
Changes in the global prices for oil and gas, affecting
government coffers like in Mexico, Brazil and Argentina
A sustained slump in the price of mined minerals, affecting
heavily Chile and Peru for example
Social unrest reducing business confidence and private sector
investments
Figure 1: Latin America: Power demand declines since the start
of COVID-19 quarantines (relative to the same periods in
2019).
IHS Markit experts are available for consultation on the
industries and subjects they specialize in. Meetings are virtual
and can be tailored to focus on your areas of inquiry. Book in a
consultation with Etienne Gabel.
Etienne Gabel is a Senior Director of Gas, Power, and
Energy Futures at IHS Markit.
