How South American cities and their businesses will set the tone for the covid recovery

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Reports of the death of large cities have been greatly exaggerated, with South American urban centres likely to play an important role as the global economy moves into reset mode, experts on city urbanisation say.

Professor Greg Clark, a leading authority on cities and urbanisation and group senior advisor of future cities and new industries at Hong Kong Shanghai Banking Corporation, said the demise of central business districts because of the pandemic has proven “not to be the case” as economies moved into recovery stages.

“If you look at China and some of the larger cities in north-east Asia, you will see that far from the death of cities we are experiencing a new kind of resurgence.”

That resurgence, he said, was aligned with the pandemic evolving from its initial health and economic crisis stages into a ‘net zero’ recovery and reset, so “it’s important not to extrapolate from one-phase lessons you think will be long term.”

Clark said that as vaccines are developed, people need to start thinking about covid as an agent of change, but it “would be wrong to think the pandemic is over when we have no more cases.”

Embrace zero carbon

But a key question would be what the pandemic does to the ‘demand-side’ profile of South Americans trading partners and “how successful they will be in producing the customers that the region needs into the future.”

The success of the cities will also be linked to how well they embrace the net-zero carbon agenda, and that had evolved into more of an “infrastructure agenda” than a climate change one, Clark said.

Citing “extreme anxiety” around global sea-level changes and the link to climate change, he said leading cities had prioritised the net-zero carbon agenda and focused on the fundamental challenges of reforming business models for energy and its sources, transportation, real estate and construction to turning buildings into ‘net energy producers’ while optimising water consumption and reuse. 

To that end, and to ensure the region lived up to its increasing profile on the world stage, the countries should be reworking its cities’ business models, “to create a liveability and innovation strategy, as a way of capturing value from the net-zero pathway and using that to refinance infrastructure.”

Accidental experiment.

Global covid lockdowns were an “accidental experiment”, Clark said, that proved economies can ‘decouple’ productivity from carbon emissions and show economies can be productive without producing carbon at the same time.

While “we’ve proved to ourselves that this is possible”, covid had raised large issues around how people should be reconfiguring utilities, real estate and infrastructure and how agile they need to be in adapting to the new world.

Covid accelerated the fourth industrial revolution, effectively digitising infrastructure as a service, and new jobs will come from “the interface between previously separated sectors that are becoming more integrated because of the function that tech plays, across both systems and services.”

However, that while many home-grown businesses are already pushing the frontiers of knowledge across IT, medical, agritech and manufacturing sectors, “we have yet to reach a critical mass of labour, capital and expertise in these sectors that catalyses further entrepreneurship and creates the capacity to market globally.”

Clark said traditional sectors such as aviation, foodservice and tourism are facing significant adjustments to business as usual and there was also a desire to see them find their “right-size.”

The pandemic also highlighted the frailty of supply chains and trade platforms. Clark said because they are focused on efficiency the sector is “not sufficiently resilient to deal with this kind of crisis, and now needs to build in optionality and digital capability.”

For example, the uptick in digitisation was “creating a completely new market in digitised and remote medicine and changing the way doctors provide their services.”

While many of the “loser” sectors are dependent on the success of vaccine distribution, and were re-rated by the market on recent vaccine announcements, there will still be a ‘hybrid system’ after a normalised pandemic response. 

The blended city

A good example of that, he said, is the real estate sector, where covid-19 will be an accelerator into overlapping housing and labour markets with people getting opportunities to live in “distinctive locations” and work in others.

He also points to the arrival of the “blended city”, which combines the best of the physical amenities and attributes of the city, coupled with the virtual city and the benefits of digitisation. 

What this leads to, he said, is a new set of choices for citizens but also a series of leadership and investment challenges where infrastructure will be most critically exposed.

Source: Business Desk ( modified )

A regional company which has reacted most successfully to these changes has been Mercadolibre from Argentina.

MercadoLibre, is Latin America’s answer to China’s Alibaba, is now worth $63bn on Nasdaq, more than doubling its value over the past year as it powered past old-economy Brazilian giants like Vale and Petrobras to become the region’s biggest winner from the coronavirus crisis. “This pandemic has moved us forward maybe three to five years,” the 49-year-old Argentine chief executive of MercadoLibre (or “free market” in Spanish) has said.

He predicted that his e-commerce business, which has benefited from this year’s boom in online shopping, will keep growing for at least another decade, “if not more”.  Such optimism is based on the fact that Latin America remains at an early stage in the digital transformation of retail. In the third quarter of this year, MercadoLibre’s net revenues jumped by 85 per cent year-on-year to $1.1bn. Meanwhile, total payment volume was up by 92 per cent to $14.5bn.

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