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LATIN AMERICA | 15-05-2020 15:55

Bank of America says Latin America’s economy to crash 6.8% this year

Bank of America Corp expects Latin America’s economy to slump by 6.8 percent this year and warned that plans to reopen businesses are unlikely to go smoothly as new cases continue to soar.

Bank of America Corp expects Latin America’s economy to slump by 6.8 percent this year and warned that plans to reopen businesses are unlikely to go smoothly as new cases continue to soar.

Brazil, the region’s biggest economy, will suffer a 7.7 percent contraction, while Mexico’s will fall eight percent, BofA said.

Weak healthcare systems, limited space for fiscal stimulus and a high degree of labor informality make Latin America particularly vulnerable to the coronavirus pandemic, BofA economists said in a report published Friday.

Argentina is in the early stages of reopening and Mexico is likely to follow the U.S. by allowing the manufacturing sector to go back to work. But limited virus testing capacity means that plans to end lockdowns across the region are fraught with uncertainty, BofA said.

The Andean region will also suffer a deep slump, with contractions of nine percent in Peru, four percent in Colombia and 3.2 percent in Chile, according to the report.

“The global effect of the virus, coupled with the drop in commodity prices and the direct effects of the virus in the region, created a perfect storm for a region that was struggling to grow even before the aforementioned negative shocks,“ BofA economists wrote in the global research report.

Debt levels are set to rise significantly, according to the report, which cited Brazil, Mexico, Ecuador Costa Rica and El Salvador as the most affected. Colombia is on the cusp of losing its investment-grade status, while Peru and Chile will suffer sizeable increases in their debt levels, it said.

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