Week Ahead: Elevated Case Levels Pose Significant Risks As South America Approaches Winter

• In the weeks ahead, Fitch Solutions will be watching how the ongoing COVID-19 pandemic affects South America as the region heads towards winter. COVID-19 tends to spread more easily during the winter months, and much of the region is still experiencing elevated case levels as a result of the February and March surge. 
• The more contagious P.1 variant of the disease, which was first identified in Brazil, is thought to be behind the persistently high levels of cases in 2021. In particular, Uruguay, Argentina and Paraguay are in the midst of a significant surge in cases, with Uruguay surpassing 4,000 cumulative deaths from COVID-19 on May 26. 
• A further surge in cases has the potential to derail the region’s economic recovery. Q1 2021 real GDP prints showed the economic rebound accelerating in Chile, Peru and Colombia. However, extended COVID-19 lockdowns in Q2, or even Q3 2021, would likely keep unemployment elevated and weigh on business confidence. 
• Extended lockdowns and associated economic hardship could further stoke the trend of anti-incumbent sentiment that has emerged over the last several quarters, particularly ahead of major elections in Peru, Chile and Argentina.

(Source: Fitch Solutions)