In a hyperconnected world, the Russia-Ukraine conflict generated a crisis in the supply chain. One of the most worrying effects of the war It is the shortage of basic products, which also caused a sharp rise in prices, especially for wheat, corn and oilseeds, as well as fertilizers. David Malpass, President of the World Bank Group, himself stressed that A new global food crisis is brewing.

This situation opened a New source of uncertainty for the global economyAs a result of the new international conditions, the world economy is estimated to grow by 3,3% in 2022, that is, 1,0 percentage point less than what was projected before the start of the conflict.

Contrary to the effects of the war in the conflict region, the economies of South America are expected to grow by 1,5% on average, those of Central America and Mexico by 2.3% and those of the Caribbean by 10.1% - 4,7% if Guyana is excluded, whose growth rate is estimated to be 49.0%.

At the country level, estimates indicate that the most dynamic in South America would be Venezuela, with 5,0%, Colombia, with 4,8%, and the Uruguay, with 3,9%, as specified in a recent ECLAC report. 

In Central America, the most dynamic economies would be those of Panama, with a growth of 6,3%, the Dominican Republic, with 5,3%, and Guatemala, with 4,2%. Among the economies of the English- or Dutch-speaking Caribbean, the fastest growing would be Guyana, as already mentioned (49,0%), Saint Lucia (10,5%) and the Bahamas (8,5%).

Growth opportunity for Latin America

Gerardo Alonso Schwarz, economist and member of the Institute for Studies on Argentine and Latin American Reality (IERAL), from the Fundación Mediterránea, explained that the conflict “comes to deepen a trend that began with the pandemic” and Latin America could play a fundamental role in the “deconcentration of production at a global level or the relocation of production, in such a way as to reduce the possible impacts of international crises.”

“This can be seen in many sectors. Latin America is seen as a region without major armed conflicts and with productive capacities in various areas,” added Alonso Schwarz, “mainly high productivity in primary sectors and the existence of productive matrices with clusters of medium and even advanced development in certain industries.”

In this regard, Schwarz added, “the existing production matrix allows for progress in complexity and diversity of products due to capacities, specialized labor and investments already available in various sectors.” The professional also emphasized that “the challenge for Latin American economies lies in being able to take advantage of this opportunity, with incentives for the establishment of FDI, legal frameworks that ensure stable conditions and investment in basic infrastructure that facilitates the export of production".

What's on the horizon?

Looking ahead, in the long term, food (and fertilizer) security must be the priority. The region is a net exporter of food, thus contributing to global food security, But intraregional food trade is low as a proportion of total exports. 

The region's position as a net food producer is favoured by its wealth of biodiversity and biological natural resources and the availability of water and agricultural land, especially in the countries of the Southern Cone. However, the costs of negative externalities of agricultural commodity supply chains are absorbed in the region.

The current conflict also accentuated the tendency towards a Greater regionalization of trade and production which has been observed for some years at a global level. The region cannot escape this trend, through which countries seek greater strategic autonomy in the supply of key products and inputs.

The current situation represents a new opportunity to boost the regional integration project, focusing on the creation of intraregional production chains that reduce the region's excessive dependence on suppliers from outside the region.

Decarbonized supply chain

In a context where supply chain disruptions are a reality for many companies, resilience has become a top priority for business leaders. The challenge lies in a new critical aspect: decarbonisation.

Decarbonized supply chains are more resilient supply chains and even may pave the way for cheaper supply chains in the coming yearsAnd shipping, which accounts for about 90% of the ton-miles covered in global trade, is a good place to start.

According to McKinsey & Company“Decarbonized shipping won’t solve supply chain bottlenecks like driver shortages, but it can help with fuel price volatility”

“Improving fuel efficiency reduces exposure to sharp price swings in fuel costs. Our research shows that between one-third and one-half of decarbonisation will come from improved fuel efficiency,” says a document from the consultancy.

For the strategic consultancy, the adoption of carbon-free fuels will close the remaining gap. Clean hydrogen-based fuels (including e-methanol, e-ammonia, e-methane and hydrogen itself) can become cost-competitive within ten to twenty years.

“Unlike fossil fuel production, which is concentrated in specific regions, hydrogen fuel manufacturing is geographically diverse. After all, solar and wind power are abundant in many places. Such availability should result in a competitive landscape that drives down costs,” they warn.

From SURA Insurance We understand that, in order to avoid risks and be increasingly competitive, it is important that your supply chain reach your suppliers and their suppliers, as well as your distributors. That is why it is necessary to protect yourself with procedures that allow you to respond and act in the best way to reestablish your activities, identifying your vulnerability to adverse events and ensuring the continuity of your business.