ეკონომიკური პროფილი (Jan 2022)
IMPACT OF COVID 19 ON THE PERFORMANCE OF CENTRAL AMERICAN EXPORTING COMPANIES: A FIRST REVIEW
Abstract
The Covid-19 disease has had major consequences around the world for both public health and the real economy. This economic crisis generated by COVID-19 turns out to be different from previous crises in aspects such as the urgency, scope and magnitude of the negative shock on demand and supply. Countries such as El Salvador, Honduras, Guatemala and Nicaragua, located in Central America, which are among the poorest in Latin America implemented anti-Covid-19 measures since March 2020. Such as restricting mobility and temporarily shutting down non-essential economic activities. As a result, households and businesses are facing an economic downturn due to the pandemic, with effects across the supply chain and from the demand side, because customers can't leave. For this analysis, the average impact on the sales of exporting companies will be estimated. The results indicate that all companies experienced a sudden drop-in economic activity. Permanently closed exporting firms accounted for 6% of employment, compared with 1% for all other firms in the domestic market. This is a first review of the effects of Covid-19 mitigation measures on the performance of exporting companies in four Latin American countries. The study uses a longitudinal database to perform a descriptive analysis of company conditions and company survival. A difference model is used to estimate the average impact on the sales of exporting companies. The control variables were the characteristics of the company, as well as whether it was temporarily closed due to Covid-19. The results indicate that all companies experienced a sudden drop-in economic activity. Permanently closed exporting firms accounted for 6% of employment, compared with 1% for all other firms in the domestic market. The estimation model indicates that for businesses that temporarily closed during this period, there was a further 8% reduction in sales. This article contributes to the literature in several aspects. First, the results complement articles investigating the economic impact of COVID-19 by providing quantitative evidence on the pandemic situation in four Central American countries. Second, longitudinal data provides a unique perspective on how companies have been reacting to the pandemic, as they allow us to control a few variables that can alter analysis in other types of structures. Third, I further examine how the impact of the pandemic on businesses varies by country based on ownership structure and other characteristics. With the observed consequences, our results provide information that can help us consider the broader economic implications of the impact of COVID 19, as well as the design of strategies for recovery.
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