Coronavirus: As Latin America reports cases, Florida businesses could get hit
It’s often been said that when Latin America catches cold, Miami gets the flu. This time, the reverse could be true.
In recent days, Brazil reported its first case of Coronavirus, and suspects there are likely more. Concurrent with the global stock market selloff, Sao Paolo’s stock exchange has fallen more than 5%, and Brazil’s currency, the real, fell to an all-time low against the U.S. dollar according to Bloomberg. Thursday, the Dow Jones Industrial Average closed down more than 4%, dropping almost 1200 points.
Even if the actual outbreak in the region remains subdued, Latin America’s dependence on trade with China suggests there could be a ricochet impact to South Florida’s economy, according to Alice Ancona, senior vice president and chief operating officer of World Trade Center Miami.
“Brazil is one of the biggest export markets for Florida,” she said. “We’ve been looking at Brazil very optimistically, but reports are they’re already slowing down.”
Albert Ramos, head of Latin America research at Goldman Sachs, told Reuters that China is a leading export partner for Brazil, Peru and Chile.
“The key source of downside risk to LatAm is a deterioration of the terms of trade triggered by deep long-lasting impact of a China slowdown on commodity prices,” he told the wire.
Economists are already cutting Brazil’s growth forecast as a direct result of the economic slowdown in China.
Meanwhile, a global slowdown in tourism sparked by the worldwide outbreak will likely have an immediate impact on the entire Florida economy. Florida hosted more than 14 million visitors in 2019 from overseas who generated some $25 billion in statewide economic impact.
“As European countries seem more impacted, we’ll start seeing airlines react, and that will have an impact on us here,” she said.
Local retailers expect shortages from coronavirus
As spread of the disease slows in China, some Chinese factories are getting back to work (Notably, Starbucks announced Thursday it is reopening all its China shops.)
But South Florida businesses say uncertainty still remains as the virus continues to take root elsewhere around the world, leaving forecasts cloudy — and shortages all but certain.
Andres Ochoa, vice president of SAP USA Truck and Auto Parts in Doral, estimates that 80% of the workers at Chinese factories manufacturing his parts have returned. Among the exceptions is a facility in Wuhan, where the outbreak originated; the brake shoes it makes comprise a fraction of SAP’s total inventory.
But Ochoa says other issues have now emerged. For example, a vessel containing SAP products that was bound for Miami from the port city of Ningbo has been rerouted to southeast Asia. It is now expected to dock in Long Beach, Calif., and SAP will likely have to pay the cost of shipping the parts cross-country via freight. The cost of doing so is expected to eat into SAP’s margin for the quarter.
Another issue: Even as factories lurch back to life, many may still be missing raw materials that come from virus-impacted areas. And with a shortage of truckers willing to haul from these areas, the factories that are open may not be able to produce much in the early days.
He estimates that every two weeks of continued disruptions could result in as much as 5% decline in his business.
“We’re trying to diversify with other countries, but not everyone has product,” he said. “And the U.S. doesn’t really make what we need anymore.”
Keith Koenig, CEO of City Furniture, said he has also been notified that some suppliers in China are back online, though many remain shut down.
“It’s moving in a positive direction, it’s just a matter of how quickly,” Koenig said.
On March 4, Coca-Cola said it did not anticipate any shortages of its Diet Coke or Coke Zero products, and that it had initiated contingency supply plans for ingredients sourced from China.
Long-term impact?
Capacity in China remains far from full. Oliver Evans, founder & CEO of SharkDesign, a product design firm based in Wynwood, also works with multiple factories in China; most of these, he said, have not yet returned to full force. As a result, he’s says he’s had to cancel more than $2 million in orders in the past month and also postponed new purchase orders.
“So a lot of things are in limbo,” he said.
Even in factories that have come back online, working conditions may still cause production to be sluggish. Jason Prescott, who works closely with Chinese vendors as head of Miami-based global trade group Apparel Textile Sourcing, said some workers are taking limited shifts and are having to wear what he described as head-to-toe medical suits.
“Nothing is really back to normal,” he said.
Evans, of SharkDesign, forecasts that many consumer goods manufactured in China, including toys and electronics, may start to be in short supply in the U.S. starting in mid to late spring, as the gap in ordering cycle that has hit in January and February begins to bite. Should certain factories remain offline, these shortages could last until Christmas, he said.
Among those who faced an immediate impact as China halted many overseas imports were Florida Keys lobster fishermen. Bill Kelly, executive director of the Florida Keys Commercial Fisherman’s Association, said earlier this month that the price of spiny lobster fell by nearly half once the announcement came down.
He now says it is too soon to say what the long-term impact will be; it is possible that U.S. sales may provide some relief. His organization, which represents 650 fisherman, has also reached out to state officials for additional support.
Meanwhile, cruise stocks closed down about 4% Thursday, and are now approaching 50% losses for the year.
This article has been updated with a statement from Coca-Cola.
This story was originally published February 27, 2020 at 12:54 PM.
