The impact on business caused by the Coronavirus is tragic in all spheres of the economy, but it is possible to continue operating despite the outbreak.
Whether on the radio, TV or social media, everyone is talking about coronavirus. In addition, there has been a polarization among people about whether to support the economy or fight the disease. However, the impact on businesses has a negative impact on the fight against the pandemic.
This reasoning comes from a very simple fact: without effective resource distribution systems (a principle of capitalism), there will be a jamaica email list shortage of supplies everywhere. However, this must be weighed against the caution that the outbreak requires, as people are also part of the economy.
Therefore, if everyone stays at home and does not support the economy, we will perish due to lack of resources. However, if everyone continues with their lives as if the disease were nothing, it will dominate a large part of Brazil, halting the entire economy and falling into the same situation as before.
Reaching consensus is vital in this time of crisis, and to do so we must understand how the pandemic is destroying our resource distribution systems (the economy).
Business impact caused by Coronavirus
In short, we can say that the impact on businesses caused by COVID-19 was widespread. Therefore, all sectors of the economy were either directly or indirectly affected by the outbreak. No one escaped unscathed.
However, as you may have already imagined, some sectors suffered much more than others, and instead of mentioning everything mixed together in the text, we will separate all the content into “major areas” of our economy. This will make it easier for you to follow the content.
Steel, mining and cellulose
In an analysis carried out by experts from Itaú BBA, a comparison was made between 2020 and 2003, making it easier for us to understand the problem. To give you an idea of this date, it was a period when we had the SARS crisis.
However, unlike what we see today, the impact in 2003 was much smaller on commodities than it is today. As a result, the recovery of companies in this sector was quite quick, and nothing too serious happened.
However, something we must take into account to make an accurate comparison is the size of China today. In fact, today's China is several times larger than it was in 2003, and it consumes many more resources for its subsistence.
Thus, the impact of COVID-19 is expected to be much greater today than in 2003, given that a larger portion of the economy will be “locked down”.
As a result, companies that work with commodities suffered catastrophic impacts, especially Vale (VAL3) and Suzano (SUZB3). This is because China consumes more than 70% of the world's demand for iron ore.
A decrease in this demand means excess inventory, which ends up implying a decrease in value, and ultimately we have mass layoffs. Mass layoffs lead to a lack of money circulation, and at the end of all this we have a huge crisis waiting for us.
To make matters worse, China also accounts for more than 30% of cellulose consumption in the market, directly impacting companies worldwide. This creates the cycle illustrated in the previous paragraph.
However, there is a mitigating factor for the effects in the pulp sector, which is the production of paper for domestic consumption. Therefore, the impact would be indirect on these companies, being much smaller than on others.
Finally, we have the steel industry, which is barely affected by China. The key to understanding this is to look at where their products go: the domestic market. This means that other countries have little influence on this sector.
However, we always have an indirect influence, as prices in Brazil depend on prices abroad.
In 2003, the price of HRC and rebar fell by 19% and 4%, respectively, but quickly recovered to pre-crisis levels. Furthermore, the depreciation of the local currency helps to minimize the damage from this price drop.
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