As long as we continue with the questions and uncertainty about when the pandemic will end and how much economic activity has been lost, it is not yet possible to know exactly the impact of the coronavirus on the global economy, much less on international trade.
However, at the beginning of the pandemic it was expected that the impacts on supply chains would only be limited to the short term, but today we know that the prolonged fall in economic activity has generated problems of Serious medium and long-term supplies in and out of the Asian continent.
These supply chain problems have already originated in sectors other than health and medicine, and it is estimated that they will continue to be generated in other sectors.
Economic and trade problems increased by the pandemic
We can name some economic factors derived from the uncertainty, volatility and capital outflow that have increased with the pandemic:
- Stock crash
- Currency devaluation
- Oil Price Contraction
- Gold Value Loss
- Weakening of the manufacturing industry and international trade
Factors that have weakened international trade
- Trade between importers and exporters was reduced.
- There was a drop in economic activity, which reduced the demand for goods in general.
- There were problems in the supply chain that goes from intermediates to finished products. </ li>
According to the Inter-American Development Bank, these are some economic initiatives to face the trade problems left by the pandemic:
- Support free trade.
- Increase the coordination and integration of regions to continue with foreign investment.
- Reduce restrictions on exports of medical equipment and supplies and medicines since, although this increases local supply in the short term, it creates uncertainty in the medium and long term.
- Remove tariffs and non-tariff barriers to equipment, supplies and disinfectants, which would help reduce the costs of these products.
- Promote regional and multilateral trade agreements to facilitate the coordination of measures to prevent and eliminate pandemics.
- Simplify procedures for clearance of critical goods.
- Disincentivize high protection of the agricultural sector to avoid a shock to national food supply chains.
- Work with specialized agencies to identify opportunities and create business links.
Situation in China, the United States, the European Union and Mercosur
With China being the main link in the global supply chain, the closure of its factories and customs at the beginning of the pandemic caused a domino effect around the world.
In the United States, several companies reported disruptions to their supply chains due to health restrictions. The most illustrative example was in September of last year, the situation of the more than 70 container ships stranded in California ports due to interruptions and delays.
In the European Union, the digital COVID certificate came into operation in July last year, facilitating and promoting safe travel and transfers to reactivate the economy.
In Mercosur, commercial measures were adopted, such as Brazil, which eliminated procedures for automatic import licenses for products related to the fight against the coronavirus. On the other hand, Paraguay reduced the import tariff to 0%, applied to medical products:< /span>
- The tariff reduction of these products is accompanied by a reduction of the Value Added Tax (VAT), at an effective fixed rate of 5%.
- The temporary implementation of export licenses (prior export license) for nonwovens and woven face masks. This means that the specific functions in customs matters were optimized, prioritizing controls and risk management over medical products as well as favoring their competitiveness and thus facilitating foreign trade.
Paraguay and its foreign trade in the pandemic
The main impact on foreign trade was on sales due to the drop in re-exports, which fell 46% compared to 2019, and merchants dedicated to importing or exporting demanded flexibility in the closure of borders or the urgent approval of a health protocol for cross-border sales.
In 2020, food exports, such as soybeans and their derivatives, were more important and drove growth in the second half of that year and last year. For its part, meat sales grew 8.5% compared to 2019. Growth is expected to gradually moderate to 3.9% in 2023 as commodity prices and economic conditions stabilize. worldwide.
Paraguay is one of the few countries in the world that maintains diplomatic relations with Taiwan, and through trade agreements, this country has become the third largest buyer of Paraguayan meat. Although it is still a small amount compared to Chile and Russia, it is a destination and a commercial relationship that must take into account for this sector.
On the other hand, within industrial exports, the maquila sector was significantly impacted by the pandemic, especially during the most rigid stage of the quarantine. This segment is part of an important production chain, since a large part of its production is made with the exclusive purpose of being re-exported to Brazil. This is a segment that should be considered now and in the future, since it represents an important opportunity for foreign capital due to the tax and service advantages it offers.
Although imports and exports have shown some notable falls, the reality is that foreign trade operations in Paraguay managed to weather the bad weather. There is still much to improve, especially the environment where foreign trade takes place, such as its logistics infrastructure.
Finally, will this year be the end of the pandemic? The recovery will continue to be prolonged, so it is necessary that governments continue to take adequate measures to reduce the impact on their economies and societies.
Alfa Trading S.A. your ally in logistics solutions
In Alfa Trading S.A. We know in depth the economic and political problems that have resulted from the pandemic, so we can address international trade and logistics issues that your company is currently facing. Find out now about our comprehensive solutions in international logistics and contact us so that your export or import activity can be carried out with total success from Paraguay.Comparte este artículo con tus amigos: