With countries and companies around the world grappling with inflation caused by the pandemic, and commodity prices rising due to disruptions in global supply chains, the current international situation makes the global economic outlook even more unclear and volatile. Given the humanitarian crisis in Europe, the reduction in energy supply is added, the severe sanctions will affect food security, as well as provoke a decrease in the technology production as a consequence of the decline in supplies of rare metals. What could be the impact on Latin American countries?
Impacts on global supply chains
According to data from Dun & Bradstreet, at least 370,000 companies worldwide trust their Russian suppliers, while 241,000 companies trust their Ukrainian suppliers. Given this fact, among the most affected countries are the United States, Canada, Italy, Australia, China and Brazil. But the impact will reach many other economies.
One of the central points of the discussion is the low levels of gas storage in Europe, reaching only 33% of its total capacity. After the sanctions imposed by the European Union on Russia, Germany had to suspend the 2 gas pipeline and along with it the 30 billion cubic meters of gas that would supply the continent in 2022. In the short term, gas prices will remain high, in addition to the pressure on global supply chains perduring.
This report was developed by Dun & Bradstreet's trade data specialists, and it highlights the trade impact this global crisis will have and how this will create a ripple effect in supply chains, having a major significance in Europe, but with repercussions in other continents as well.
What will be the impact on Latin America?
In the short term, the sanctions imposed on Russia will have an impact on raw materials, and companies will need to redirect their supply chains. Latin America stands out with several countries that would function as alternative suppliers to cover these needs.
In the case of copper, Chile is one of the main options to supply the mineral to the world, with reserves that reach 200 million metric tons. Brazil stands out as a major supplier of raw materials worldwide, with resources such as iron ore, iron itself and steel. It is also important to highlight its agricultural production of corn, a position it shares with Argentina as another possible alternative supplier of this grain. In the case of Mexico, its industry and resources make it a viable option for supplying the insulated cable market and a wide range of electrical conductors.
What measures or practices should companies consider in this scenario?
With the generalized uncertainty that we are experiencing in both markets and economies, the impact can be concerning if you are not sufficiently prepared to know and face the risks in your supply chains. Some of the actions or practices recommended by specialists include:
- Balancing and reassessing risk within the company's customer portfolio
- Monitoring both suppliers and supply chains at different levels and their associated risks
- Employing technologies or solutions to manage risk through key data and insights that make processes transparent for better decision-making
- Identifying key alternatives, for both supplier and product, to determine what the impact and associated risk might be
- Investing in better technology that strengthens agility in the company's supply chains over the long term
Do you want to learn more about the potential impacts of this event and how it can affect your business? Download the full report to get all the information and contact us to find out what Solutions can help you manage risk in your supply chains.