Investment in automation increase with COVID-19

Long worker quarantine periods would encourage investment in automation and robotics, projected the Economic Commission for Latin America and the Caribbean (Eclac).

Already, some high-tech companies have increased the use of artificial intelligence tools to address quarantine shortages.

The COVID-19 crisis will accelerate some ongoing structural changes in the past decade.

For example, forced quarantines will increase the virtualization of economic and social relations; telework will prevail in more industries and regions, and digitization will advance even faster.

In this framework, the most technologically advanced companies would increase their advantages in relation to backward companies, in particular MSMEs.

Inversion and coronavirus

The most important action to deal with COVID-19 is to contain the spread of the virus through self-isolation, quarantine, and social distancing. That measure has positive health impacts by flattening the contagion curve.

But it also affects economic activity since distancing generally implies a slowdown in production or even its total interruption. This reduces working hours and wages and results in a consequent reduction in the aggregate demand for goods and services.

Since most companies finance their investments primarily with retained earnings, gross fixed capital formation will be adversely affected. The multiplier effect of consumption will be significantly negative and will be aggravated by the lack of private investment.

Companies and context

The behavior of companies will continue to change in the sense of an increase in the location in places closer to their large markets (nearshoring) and confidence in global suppliers will deteriorate.

This will lead to smaller production batches, loss of economies of scale, scope and learning. All this will have a negative impact on employment, wages and income distribution.

Costos económicos del COVID-19

Regardless of their size, all companies are affected, particularly in the aviation, tourism and services sectors such as commerce.

Many already face a significant decrease in their income, the increase in insolvency and the loss of jobs in specific sectors, which will have a marked impact on the labor market. Maintenance of operations will be especially difficult for micro, small and medium-sized enterprises (MSMEs).