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Chile: assessing the wounds from lockdown

In line with the global trend, Chile recorded a 14.1% drop in GDP during the second quarter of 2020 - the worst since the 1980s. Domestic demand and investment plummeted dramatically as a result of strict quarantines, with unemployment increasing to over 12%. However, the world’s largest copper producer kept production strategically active and even registered slight growth, thus pushing economic projections to an average contraction of 7.9% for 2020, which is below the -9.1% projected for Latin America as a whole. The drop could be even less pronounced as Chile recently approved a historic withdrawal of 10% of mandatory pension savings, injecting some US$ 10 billion into national consumption, although many warn that this will have serious consequences in the very long term.

Peru, the second largest copper producer in the world, took extreme healthcare measures, even closing the mining doors. Experts say it will be the worst-hit economy in this neighbourhood, with a projected 13% contraction in 2020.

Latin America is now easing lockdowns after the first wave of infections and is looking forward to gradually reactivating its economies. The perception is that demand for recyclable materials has shown positive signs during the third quarter. Brazil and Mexico (among the worst-hit along with Argentina, Peru and Ecuador) are showing progress with their reactivation plans, and their metal scrap demands indicate a more promising early 2021.

A similar increase in demand is happening with plastics, although the scars from the recent drop in oil prices are still visible. India and other parts of Asia have considerably intensified their demand for scrap and, if commodity prices continue to assist us, we could have an end to the year that is, let’s say, “more stable”. Although paper and cardboard had been facing an oversupply since 2019, it seems that mills preferred to build inventory during the first half of the year in the event of potential stock breaks, causing an increase in collection. However, recyclers remain vigilant as we could face high inventories again.

After a year of this viral hurricane, the collateral damage from lockdown is taking the lead. It is time to put into practice all the environmental awareness that has been sown during this period of hibernation and do our best in order to reactivate our economies.