“And even though the winds of life blow strong, I am like the reed that bends but always remains standing,” sang the Dúo Dinámico (and several others, in their own versions) in their popular 1988 song “Resistiré.” You don’t have to be a music expert to grasp its meaning and understand why it has been used as an anthem during various difficult times.

Our country is facing a difficult situation today. The pandemic, the social crisis, and the economic crisis have hit hard. Last year, GDP fell by just under 6%, more than a million people lost their jobs, and around 300,000 businesses stopped reporting sales. Mobility restrictions affected much of our daily lives, and adjusting to them was not easy. Personally, I’m one of the privileged few who was able to continue working from home, but with two preschoolers who needed attention, my mental health starting to take a toll from the lockdown, and college students who were hard to keep focused in online classes, staying productive was no easy task.

Do you remember that, at the beginning of all this, the expectation was that things would start to return to normal starting in the third quarter? Well, that’s also having an impact, because many of the temporary solutions that were implemented weren’t necessarily designed to be permanent. So, every time the situation looked worse and lockdowns were expanded, the economic situation worsened, with all the costs that entails. As a result, for 2021, the first half of the year was expected to remain challenging, but on a trajectory that would prevent us from reliving the most difficult moments of 2020. However, as of mid-May, with the exception of a few municipalities in the Metropolitan Region and others in other regions, the country remains under restrictive measures—even worse than at the same time last year.

In this context, the Imacec[1] for March 2021 grew by 6.4% compared to the same period last year, exceeding market expectations. This might seem like a lot, especially given the most recent data, but it is precisely that weakness that explains this result. The low comparison base represented by 2020 is, in part, “to blame” for the high growth rates we will likely see in the coming months. However, let’s not stop there. What’s really important is that, in a month as challenging as March 2021, economic activity—adjusted for seasonal and calendar effects—contracted by only 1.6% compared to February. Do you know what that variation was last year? -6.0%. We’ve adapted.

Along the same lines, in the Central Bank’s latest IPoM, I learned that two out of every three companies that had stopped reporting sales have resumed doing so. But that’s not all. As of December, more than 110,000 new companies had been created, meaning that, on net, during a year marked by social unrest and the pandemic, there are 20,000 more companies operating in the country. You’re probably wondering if this growth, in terms of value, is similar to what existed previously. Well, inter-company connections—a way to measure the number of businesses—have returned to pre-pandemic levels. In terms of hiring, we’re seeing numbers very similar to what companies had, on average, in previous years (about 3 employees per firm, rising to 7 if we include those that start with 3 or more employees).

It is for the reasons outlined above that, even though the pandemic is not over and we will likely have to live with it for some time to come, at Fynsa we have a bullish outlook in our growth forecast for 2021 (6.5%). We adapt, we move forward, we innovate, and we learn to do things differently.

We're holding out.

Nathan Pincheira

Chief Economist at Fynsa

[1] Monthly Economic Activity Index