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We work with a significant number of clients with global
footprints, especially in insurance, providing realistic disaster
scenarios. The goal of these scenarios is to consider events that
are unlikely but would be impactful if they happened. Our clients
use these to evaluate their books of business against potential
losses. We recently shared our RDS for a possible
hightened risk of war in the Middle East. In today's post, we
turn our analysis to Latin America.
Our current view on Latin America SRCC (strikes, riots and civil
commotion) is that protests in major Latin American countries in
2021 are likely to maintain the trends observed in 2020, namely
occasional protests by labor unions, students, and low-income
informal workers in the main capitals. However, for this exercise,
we considered what it would look like if instead, risks rose
significantly in the region.
Scenario: Latin America enters a second year of economic
recession, as the third wave of COVID-19 engulfs the region, with a
surge in the number of COVID-19 cases overwhelming hospital
facilities. This all combines to trigger violent protests across
the region.
Intensive care units (ICUs) reach full capacity in several major
cities, and lack of oxygen compounds the death tally. Governments
are forced to introduce fresh strict lockdowns, resulting in the
closure of all hospitality venues, while police-enforced
quarantines cause a sharp decline in consumption and investment,
pushing thousands of companies into bankruptcy. Millions lose their
jobs, while populations fatigued by already lengthy lockdowns defy
curfews. The situation is compounded by the depletion of public
finances, preventing governments from maintaining emergency aid.
Most cash transfer and job protection schemes that mitigated the
fall-out from the pandemic in 2020 are withdrawn.
This results in fresh bouts of violent protests. Protesters'
grievances across the region have significant similarities,
including anger at growing unemployment; demands for economic aid,
funding for education, and protection of the environment; and human
and labor rights issues. This overlap sees protest movements over
different issues and in different countries feeding off each other
via social media campaigns, through which coordination of the
timing of marches and a common platform is agreed upon. Levels of
violence and business disruption in Chile, Colombia, Mexico, and
Peru are particularly high. In these countries, hundreds of
thousands of protesters congregate in the central commercial
districts of the main capitals and overrun police forces trying to
prevent marchers from reaching the seats of government.
Meanwhile, anarchist groups that have infiltrated the marches
take the lead in attacking police officers with Molotov cocktails,
setting police cars and public buses on fire, and damaging
governments and commercial property. Security forces use force to
disperse the protesters, but this backfires after dozens of
protesters are killed by live ammunition, causing violent
confrontations with the police to escalate. Looting ensues, with
supermarkets in central locations, as well as in the periphery,
being ransacked. Police retreat temporarily, and the protests
extend beyond central commercial districts, with dozens of metro
stations being vandalized and facades of bank branches damaged,
while the headquarters of several multinational companies and
nearby shopping malls suffer arson attacks. After two days of
looting, the protests recede. However, occasional incidents of
looting continue to happen in the aftermath, particularly at night.
The protests and violence cease after two weeks after the
governments accept a dialogue with the protesters and open criminal
investigations over possibly unlawful use of force by the police.
However, incidents of business disruption become more common via
strikes, road blockades, and sit-ins in front of Congress and
government buildings.
In Chile, the government reacts to the new wave
of COVID-19 stringently, leading protests to take to the streets to
demand President Sebastián Piñera's resignation. The marches are
attended by hundreds of thousands despite a country-wide lockdown.
They gather in Plaza Italia/Plaza Baquedano in the Santiago centre.
Demonstrators confront the police, who react with excessive force.
This escalates into wider spread protests, roadblocks, and
vandalism throughout major cities.
In Colombia, social grievances that triggered
protests in 2019 remain unaddressed. This, together with incidences
of police brutality and frustration over COVID-19, leads to fresh
anti-government marches, which escalate into extreme violence in
Bogota, Cali, Medellin, and Barranquilla. Vandalism and looting are
widespread in these places.
In Mexico, a spike in COVID-19 cases leads to a
strict lockdown, which along with economic decline result in
hundreds of thousands marching in central Mexico City, along
Reforma Avenue and Zócalo Square. Protestors throw hard projectiles
and Molotov cocktails at the National Palace, while riot police
respond with tear gas, batons, and rubber bullets.
In Peru, low vaccination rates lead to a spike
in COVID-19 cases and a subsequent national lockdown. Most of the
population refuses to comply with lockdown measures and join
nationwide demonstrations. Protests include roadblocks in the
capital Lima and Arequipa, Peru's second-largest city. The protests
block highways disrupting cargo deliveries to the main cities,
including fuel and oxygen. The protests cause severe supply chain
disruptions, including at main ports and in the strategic mining
sector.
Listen to our podcast on our RDS scenario.
The
full report, including the full text for the individual
countries, indicators that this scenario is becoming more likely,
and damage factors, is now available.
Posted 07 July 2021 by Carla Selman, Principal Research Analyst, Country Risk, IHS Markit and
Carlos Caicedo, Senior Principal Analyst, Latin America Country Risk, IHS Markit
Join our webinar as our subject matter experts walk through key trends affecting each stage of the supply chain and… https://t.co/mFpMs3XP5G
May 06
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