Latin America feels the pinch of economic uncertainty as the 'Chinese dream' starts to fade
The sun shines in Sao Paulo as the helicopter takes off from Campo de Marte’s airport and, soon, the main reason behind the booming demand here for helicopter taxi services emerges: thousands of cars are literally stuck at the city’s main avenues, exasperating drivers who spend up to five hours to travel a mere 20km.
“We have all the conditions – horrible traffic, a big city and rich people – to develop our business. When clients call us requesting a service we are able to pick them up in any of the city’s 200 heliports in about 20 minutes,” says Rafael Dylis, director at Helimarte, a leading helicopter taxi company which provides rides starting from HK$3,200 per hour.
“We grew steadily by 20 per cent for years, but now the crisis is impacting us very much and we have been pushed to sell helicopters to cut costs. We don’t know what will happen in the future. Demand has gone down 40 per cent in just one year,” explains Dylis, illustrating the impact of China’s economic slowdown within Brazil’s upper class, as lawyers, traders and bankers involved in the billionaire business of supplying soybean, iron ore or oil to the Asian giant have restrained their sumptuous expenditure.
The collapse of commodity prices – of which Latin America is a major exporter – and China’s increasing economic uncertainties are painful signals of the end of an economic bonanza which benefited most of the countries in the region for the last 15 years.
Massive exports of oil, minerals and agricultural products to China stimulated growth and foreign investment for over a decade, creating a “Chinese dream” in the region, but in the meantime few countries invested in creating added-value chains to diversify the economic structures and this resulted in an over-dependence on raw materials.
“History is repeating, we have already been in this situation in Latin America: we are very dependent on our commodities and, when there is a super cycle like the one we have just lived, we miss the opportunity to sustain long-term development,” argues Victor Torres, from the Peruvian San Marcos National University.
South America’s GDP will contract 0.4 per cent this year and countries like Peru, Brazil or Argentina are already suffering from a rise of unemployment, inflation, trade imbalances and the retraction of investments. In Brazil, Chinese car manufacturers like Dongfeng, JAC or Sinotruck have postponed or cancelled projects valued at HK$3.8 billion.
Most worrying, the crisis is now spreading to other economic sectors. In Sao Bernardo do Campo, one of Brazil’s main industrial hubs, pessimism reigns. Long queues of jobseekers are a routine sight in front of the main employment centre, where daily over 500 new people leave their CV in the hope of getting a job.
“I come every week to look for work, but I have been unsuccessful. My situation has not changed for a year,” explains Joao, a young operator with the name “Jesus Christ” tattooed on his knuckles.
“We have hundreds of candidates leaving their contact details daily but we have very few vacancies,” says Eluana, an employee at a temporary job agency.
The crisis is an opportunity for some. Posters offering loans to repay debts proliferate on most utility poles in the city. Shops propose 48-month finance options with the monthly payments set as low as HK$10.
“We are having increasing demand from unemployed people who need money to repay their debts,” says Arnaldo Galvao, a director from a credit agency which offers loans in less than 48 hours. “They are mostly young people who lost their jobs and are unable to pay their mortgages. They come with their retired parents and grandparents who receive regular pensions, so they can act as guarantors.
“Our business has grown 30 per cent in the last year.”
