Geopolitical turmoil has immediate consequences on all sectors of global economic activity.
Two years have passed since the COVID-19 pandemic began. Confinement changed the way companies are managed, accelerating digitalization and the implementation of technology in the process of managing and marketing products and services.
On the one hand, e-commerce has become a fundamental part of our lives due to social isolation, and is now a shopping option as accessible for consumers as any other, or even more so.
On the other hand, trade pressures generated at a global level by the war in Ukraine have forced companies to strengthen closer trade exchanges, whether at a local or a regional level, thus contracting the globalization that began in the 1990s. As a result, increasing the efficiency of the supply chain has become one of the greatest challenges that companies are still trying to address through the search for cost reductions in labor, maquila and access to raw materials. Without a doubt, this challenge will lead to a greater drive for the digitization of processes within organizations, and a need to redesign the strategy of companies in the medium and long term in all areas, as detailed below.
Three key sectors: energy, food and technology
1. Energy
Russia is the world’s second largest producer of natural gas and is among the top three oil producing countries (International Energy Agency, 2022). The international reaction, focused on sanctions due to the war that started in Ukraine, is having a huge effect on the increase in the price of fossil fuels. Just as an example, the price of oil spiked by almost 90% over the last 12 months, which has led Nigeria to be the first country in the world to ground airline aircraft due to the operating losses caused by this effect.
Therefore, what could be a short-term energy crisis may become a paradigm shift in trade relations at the global level in the medium and long term.
2. Food
Russia accounts for 13% of fertilizer exports (Nicas, 2022); Ukraine, for 18% of barley trade and 12% of wheat (Braun, 2022).
Consequently, the increase in wheat (+21%), barley (+33%) and fertilizer (+40%) prices has resulted in the highest level of the food price index, according to the historical series of the FAO Food Price Index.
To counter this uncontrolled rise in prices, some countries, such as Malaysia and Mexico, are trying to subsidize the price of some basic staples that make up the food basket, although this has not achieved the expected results.
3. Technology
Ukraine generates about 50% of the world’s neon gas (Alper, 2022), a raw material used to manufacture semiconductors, which are essential for making chips, limiting the sale of electronic or automotive products and jeopardizing the technological development of all industries.
An adverse scenario
Consequently, we are facing an adverse scenario for markets, for companies around the world and, above all, for consumers.
A great challenge that poses a risk to the development of alternative energies, and that drives the production and consumption of local food to face the inflationary crisis in all sectors.
In any scenario, this implies a rethinking of logistics and the supply chain, impacting not only the energy, food or technology sectors, but any commercial activity.
Latin America’s opportunity
At a time of crisis and constant global changes, Latin America faces an opportunity to become a world leader in the production of renewable energies and foodstuffs, which means that it must face the great challenge of technological development.
Given the above, Latin America has an excellent opportunity to take advantage of the consolidation of the development of these three sectors, which have an impact on all industries.
In the energy sector, there is an opportunity to promote renewable energies that seek to reduce the carbon footprint, where Latin America plays a key role worldwide (IEA, 2021).
Latin America and the Caribbean account for 14% of global food production, as well as 45% of agri-food trade, which positions Latin America as a key region globally.
However, Latin America faces an enormous challenge in the development and adoption of technology and innovation. Although Brazil, Chile and Mexico are the leading countries in the region, they are still far behind major countries such as the United States, Switzerland, the United Kingdom, Sweden or Singapore (UNCTAD, 2021).
Ever-shorter waves of change
Current waves of change occur in increasingly shorter periods, less than 5 years, and are composed of crisis, contraction and development, all of them having a greater impact at the global level.
- 01Crisis
- 02Contraction
- 03Development
Therefore, the great challenge for companies in Latin America is to establish data generation strategies, which will facilitate new solutions and flexible structures that enable agile decision making to face a future of continuous uncertainty.
