Global supply networks, especially those in Latin America, are significantly impacted by the political situation between Israel and Palestine. Businesses all throughout the world may be impacted by disruptions in commerce, transportation, and industry brought on by the two sides’ continuous hostilities.
The restriction of the movement of people and goods is one of the primary ways that the conflict affects supply networks. The Gaza Strip is under Israeli occupation, which makes it challenging for local firms to operate and export their products. The Israeli government has also placed restrictions on how individuals and products can travel between Israel and the West Bank. As a result, doing business with their counterparts in Israel and Palestine for enterprises in Latin America may be challenging.
The violence also has an impact on supply chains through higher security expenses. Businesses in the area frequently have to make significant investments in security measures to safeguard their personnel and property. This may raise operating expenses and make it more challenging for Latin American companies to compete.
Production hiccups may also result from the conflict. For instance, Israel conducted a military operation in Gaza in 2014 that severely damaged the area’s industries and infrastructure. As a result, there was a shortage of commodities in the Gaza Strip, and many Latin American companies with operations there experienced supply chain disruption.
Issues facing companies in the supply chain
The war between Israel and Palestine affects Latin American supply chain enterprises in a variety of ways.
Shipping costs have risen, and there have been delays.
Because shipping companies are hesitant to sail via the Suez Canal, a crucial maritime route between Latin America and Europe, the war has raised shipping costs and delays. This is generating supply chain delays and interruptions, as well as increasing corporate costs.
Export demand is down
The war has also reduced demand for Latin American commodities to Israel and Palestine. This is due to the war’s economic dislocation, as well as the fact that many firms in the region are hesitant to do business with either side.
Increased likelihood of supply disruptions
The conflict has also increased the risk of supply disruptions for companies that rely on Israeli and Palestinian imports. This is because to the possibility that the fight will disrupt the region’s industrial and transportation networks.
The effect on specific industries
The war has had a particularly detrimental impact on the Latin American economy, particularly agriculture and pharmaceuticals. For example, Israel is a major provider of fertilizers and insecticides to Latin America. The war has restricted the availability of these items, which might have a substantial impact on agricultural output throughout Latin America.
Overall effect
The war’s total impact on the Latin American supply chain is difficult to assess. However, it is apparent that The war has begun. producing interruptions and hardships for the region’s companies. These interruptions may have a negative influence on Latin America’s economic growth and employment creation.
Here are some particular examples of how the war is affecting Latin American supply chain businesses:
- According to a Mexican car parts manufacturer, supplies to Israel have been delayed by several weeks.
- In the last year, a Colombian coffee producer has seen a 10% decline in exports to Israel.
- A Brazilian pharmaceutical company has been compelled to seek new raw material suppliers from outside of Israel.
The war is also having a negative impact on Latin American consumers, as it is driving up the prices of goods that are imported from Israel and Palestine.
Chances for businesses in the supply chain
Despite the difficulties, the political situation between Israel and Palestine presents certain opportunities for supply chain enterprises. For instance, companies that can offer answers to the issues that companies in the region experience, including security and transportation solutions, may be able to profit from the circumstances.
The crisis may also be advantageous for companies that can aid in facilitating trade between Latin America and the Middle East.
Focusing on business in Latin America
Businesses in Latin America are increasingly looking for ways to lessen the risks posed by the Israeli-Palestinian conflict. Among the actions businesses are taking are the following:
- Businesses are attempting to buy products and services from a number of suppliers in several places in order to reduce their dependence on any one provider or location.
- Technology investment: To improve supply chain visibility and management, businesses are investing in technology. This can help with faster interruption detection and reaction.
- Creating links with regional partners: Middle Eastern businesses are doing so in order to better understand the market and create plans to reduce the dangers brought on by the conflict.
The most affected products and markets
The following are the products and markets that the political situation between Israel and Palestine has the biggest impact on:
- Agriculture: The Gaza Strip is a major producer of strawberries, tomatoes, and flowers, in addition to other fruits and vegetables. Businesses that import these goods into Latin America have suffered as a result of the Gaza Strip’s closure, which prevented them from exporting.
- Israel exports a significant number of products related to technology, such as semiconductors and software. Latin American businesses that use these products in their industrial operations may be impacted by supply shortages caused by conflict.
- Construction supplies: The fighting has significantly affected the Gaza Strip’s construction industry. This has caused a severe lack of building supplies in the area.
The impact on businesses in Latin America that supply the Gaza Strip with these goods
By diversifying their supply chains, investing in technology, and forming partnerships with local partners, businesses in Latin America can reduce the risks related to the political situation between Israel and Palestine. Additionally, companies should be aware of the markets and goods that are most impacted by the conflict and take precautions to avoid disruptions.
What part does globalization play in a world at war?
It is uncertain how globalization will proceed in a militarized economy. Businesses need to be ready to react since the Israeli-Palestinian conflict has already affected international trade. Businesses must grow their clientele and look for new markets in order to minimize their reliance on unstable regions. To deal with the challenges of a globe torn by violence, businesses must continually monitor global events and adopt proactive risk management strategies.
Which countries have the best chance of surviving global crises such as the Israeli-Palestinian conflict?
A strong home economy and a broad domestic sector can help a country achieve self-sufficiency. Because of their large economies and active local markets, Germany, Japan, and the United States, for example, may be able to mitigate the consequences of global trade pauses. Countries with robust political institutions and capable governance are better able to deal with armed conflict concerns while maintaining economic stability.
What about Latin American countries?
Latin American countries, on the other hand, frequently experience difficulties in achieving economic sustainability because of their reliance on a few main industries, such as agriculture or mining. This reliance exposes businesses to changes in global commodity prices and limits their ability to adjust to changing market conditions. Furthermore, political instability and corruption in several Latin American countries might obstruct efficient governance and economic diversification attempts.
It is a difficult endeavor to predict where and how Latin America will achieve economic sustainability. Governments might invest in education and infrastructure to stimulate innovation and attract foreign investment as one potential answer. Furthermore, encouraging entrepreneurship and supporting small and medium-sized businesses can help diversify the economy and create new jobs.
Technology as a catalyst for economic growth and sustainability
Can blockchain technology be used to improve Latin America’s economic sustainability?
Blockchain technology deployment has the potential to improve transparency and efficiency in a variety of industries, including finance, supply chain management, and government services. Latin American countries may use blockchain to minimize corruption, expedite processes, and attract more investment by offering a secure and trustworthy environment for businesses and investors.
More information on this technique can be found at: Can blockchain technology help resolve some of the biggest supply chain challenges?
Please contact us to discuss how we may assist your business in using cutting-edge technology and contributing to Latin America’s economic sustainability. Our skilled staff can provide personalized solutions and help integrate new tools into your existing systems, ensuring smooth deployment and optimum benefits. Let us collaborate towards a more transparent, efficient, and prosperous future for the region.