Cargo being loaded onto a passenger airplane
Cargo being loaded onto a passenger airplane. Photo: Jaromir Chalabala/Shutterstock
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Logistics in Latin America: what to expect amid coronavirus pandemic

If the escalation of the new coronavirus continues, forcing a longer period of isolation, the priority of transport and clearance will be the essential cargo

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The coronavirus pandemic is already changing e-commerce and logistics in Latin America. Travel bans and several other measures of social isolation, self-imposed or otherwise, as well as the closure of physical stores, are driving consumers to shop more frequently online. For retailers, one of the many questions that lingers is how the movement restrictions will hurt logistics flows–this issue is especially crucial at a time when China is resuming its activities.

Despite not facing restrictions to enter the region’s markets yet, cargo traffic has been indirectly affected by official constraints on passenger arrivals, which drastically reduced the number of incoming flights in various countries. Cross-border e-commerce is the most impacted as it relies on belly freight, that is, the transportation of goods in the lower deck of a passenger aircraft.

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In Brazil, the three largest airlines (Gol, Latam and Azul) canceled the vast majority of their flights and entered into an agreement with the sector’s agency to maintain a minimum number of flights within the country. Starting this Saturday, the 14,781 weekly domestic flights were reduced to 1,241 in the country.

For the entire region, most international flights will be suspended in April, and the measure could be extended if the contagion rate of the coronavirus does not slow down. Aeromexico cut its international flights by 50%, and Avianca put 95% of its fleet on the ground.

On March 20th, the Brazilian federal government issued a decree including the postal service on a list of “essential activities” that are “indispensable to meet the urgent needs of the community”, ensuring the continuity of its operation during the pandemic.

But in one of its last bulletins, Correios, the Brazilian Postal Service, said that deliveries are being made in batches, that is, that packages are being accumulated to be delivered less frequently, and that the payment of compensations for delays in all national and international services is suspended. Correios also told LABS that it “is following the market movement and, if necessary, will apply actions to meet new demands”.

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The Brazilian IRS issued new regulations aiming to simplify the clearance processes for importers with Authorized Economic Operators (AEO) certifications in Brazil. Couriers such as FedEx, DHL and UPS have this type of certification in the country. 

What comes next?

In a webinar, Diego Rodriguez, a logistics expert from Americas Market Intelligence (AMI), said that Latin America is about to feel COVID-19’s greater impact on logistics, and that companies must be prepared for it. 

As supermarkets and pharmacies strengthen their sales over the phone or the Internet, and delivery apps continue to operate, with promotions such as free deliveries for the elderly and people in COVID-19 risk groups, more and more Latin American consumers are introduced to new ways of online consuming. At the same time, the lack of demand for other non-essential products and isolation measures are already affecting companies, even those of transport.

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Delays in Latin American customs are starting to kick-off as government agencies’ workforce is reduced because of sick staff and furloughs of workers at high risk of contagion. In this scenario, Rodriguez says that companies with their own assets are better prepared to serve retailer customers that will switch their package’s transportation to ocean freight.

In this context, there is also the possibility that more airlines will fly just to transport cargo, as American Airlines and Delta Airlines have been doing on the routes between the USA and Europe.

We hope to see the same thing happening in Latin America  as companies see this as an opportunity to generate revenue while most of their fleet is grounded

Diego Rodriguez, logistics expert at AMI.

This temporary movement, however, can be bad news for e-commerce, as this way, cargo transportation will become more expensive. In addition, there may also be, at some point, the impounding of packages, since in the coming months, airlines will prioritize orders for essential products, such as hospital equipment and supplies to contain the pandemic.

At the same time, big Latin American retail chains are hastening to adapt their operations to a strong spike in demand on their e-commerce channels after the closure of physical stores. Some of them already say they are running near full capacity in online sales, while others, especially medium-sized outlets, are not coping with orders, suggesting that international merchants might be drawn to supply the domestic market in Brazil, for example. 

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Although it may take some time, demand for non-essential products will resume, to some degree, at some point in the near future.

A survey conducted by Qualibest at the request of EBANX asked 1,100 Brazilian consumers how their online shopping habits would change during the outbreak. In total, 60% of respondents answered that they will buy products online more frequently.

Items mentioned first as intended purchases tend to be essential needs – such as food and beverage (63%) and healthcare products and medicine (58%) – but segments like cosmetics & perfumes (45%), books (44%), fashion and accessories (43%) and electronics (41%) show up strongly in consumers’ choices for the next weeks.

During and after the pandemic, Rodriguez expects that Latin American governments will review their customs operations. “All of this will show to Latin American customs the importance of reducing manual processes, and the presentation of physical documents to the clearance and release of cargo. In the next 12-24 months we expect to see customs organizations implementing electronic platforms to facilitate clearance processes,” evaluates AMI’s expert.