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This month Latin America reached a grim milestone as it became the new epicenter of the COVID-19 pandemic. Collectively the region surpassed 50,000 deaths, and Brazil became the second-worst affected country in the world. Governments across the region have, for the most part, responded in the same way to the pandemic, explains Donny Donosso, Baker Tilly’s Regional Director for Latin America.
When COVID-19 hit Europe, it hit hard. Within weeks, the region overtook China in terms of the number of recorded cases and became the active centre of the pandemic. Three months after measures were introduced to protect lives, Europe is now easing out of lockdown - slowly and cautiously.
With China the epicentre of COVID-19, many countries within the Asia Pacific region were the first in the world to go into lockdown
Life after lockdown: the view from North America
According to some reports, last week America recorded more than 75,000 new cases daily – five times the rate of all Europe. One thing is clear, explains Fred Kostecki, managing partner in St. Louis and the network’s North American Regional Chair. Economic recovery, within the United States and the wider North American region, is totally dependent on the region’s ability to control the virus.
"Until we can get control of infections and illness, we're really not go to see a return to consumer engagement. And it's that lack of consumer engagement that has really devastated industries, particularly the service sector.
"It's fear of the virus that keeps people from travelling, entertaining, dining out and physically interacting with each other. And you can buy as much as you want to online. But full recovery really depends on consumer engagement. And that depends on us controlling this virus, which clearly we haven't done yet.”
Even before COVID-19 struck, we had seen a number of protectionist measures being introduced around the world and supply chains shortening – not just from heavy weights like the US and China, but globally. And this is a trend that will likely continue in the region.
The virus has taught us that we cannot be overly dependent on other countries for our own supply chain, explains Kostecki.
"But with isolationist mentality, I think that it will certainly limit growth in the long-run.
"There has to be a balance. We're definitely seeing more on-shoring with clients and more near-shoring as well within the supply chain."
The new US – Mexico - Canada free trade agreement became effective 1 July, but it's too soon to tell how that will stimulate commerce. But with the US-Canada border still closed to non-essential travel, things are going to remain tricky.
A mixed bag
There are clear cut winners and losers in this pandemic from a business perspective.
"The M&A market has been virtually shut down for the last three months. Just within the last two weeks we've started to see some markets come back to life", says Kostecki.
"There is a lot of money, particularly in private equity, that has to be put to use or it's going to be returned to its investors – so I'm hopeful that the M&A market will see a reprieve during the second half of the year.
"The hospitality, travel and leisure industries have all been dealt a deathblow. But then on the flip side you have industries that support the new normal of working from home that have been doing really well."
Shopify's share price, for example, is rocketing on the back of a number of deals they've made with working with Walmart. And sales of technology products that support our life now have gone through the roof.
"The communications industry has been doing well, as have online businesses, home improvements, etc."
The pandemic has brought tragedy and economic turmoil. But we have also seen positives come out of it.
"I am confident our firms are going to come out of this stronger", says Kostecki.
"COVID-19 brought us together. Our influencers and business leaders are ‘meeting’ more than they ever have. They're sharing thoughts and ideas on how to navigate through this pandemic. They are spending time working on our businesses, not just in them.
"And we're seeing some really smart things operationally - things that probably we should have been doing all along! And these things aren't going to stop once we are through this pandemic. They'll continue and they’ll make us stronger."
Listen to the full podcast: Great Conversations: Life after lockdown, the view from North America.
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|Managing Partner and North American Regional Chair|