Juan Ávila
CEO and Co-Founder
TOP Energy
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Expert Contributor

What to Expect in 2021?

By Juan Manuel Ávila Hernández | Fri, 01/08/2021 - 13:40

2020 was one of the most shocking years in modern history. We saw disruption in every major activity, from the way we do business to the way we relate to our friends and family. Regardless of what happened in 2020, it does not mean 2021 is going to be an easy year, or that predictions will be easy to make. But there are some aspects that we can foresee for 2021 that will keep changing the way we do business, especially in Mexico.

Elections 2021. Mexico, like any other country, sees political changes every time a new government wins an election. Nevertheless, the fear of lack of stability in the region in the past decade was muted by some sort of continuity in major public policies, especially those focused on macroeconomics, fiscal policy and debt. Since 2015 or 2016 – depending on who you ask – major changes in the political establishment as well as the arrival of new, or old, politicians with, let’s call them disruptive policies from far right to far left, have been taking place in every country. We have witnessed the surge of these movements that have contributed to changes in the way we think about business. Mexico is no stranger to this phenomenon. With the 2021 midterm elections, we should be vigilant about whether Mexico continues down this path or takes another. Surely, this is one major development to watch in 2021.

Biden presidency. Much has been discussed in this and other forums on what a Joe Biden presidency will look like, especially on energy and climate change. Of the different areas and government branches that will tackle this subject, only John Kerry has been appointed as international “climate envoy.” Kerry was Secretary of State in the Obama administration that used climate change as a pivotal issue for energy and even diplomacy. Nevertheless, that appointment alone is not sufficient to ascertain if the Biden administration will push forward a climate agenda, or if bills on the matter will pass the Republican-controlled Senate. The Biden administration will also need to choose the head of different branches, which will also affect his policies, such as the EPA, the Secretary of Energy, The White House Council on Environmental Quality, the Secretary of Interior, among others. Although many names from the Obama administration are in the headlines for the top positions at these agencies, no appointments had been made while this article was written and we need to take into consideration that even if the next US administration becomes “the greenest of all,” it will certainly need to pass bills through a rough Congress and an opposition-controlled Senate, so the names that will end up being appointed need to be not only leaders in those areas, but they will need to have a vast knowledge on how to push forward that agenda under the actual circumstances.

Development and deployment of vaccination programs. COVID-19 has not ended. In comparison to other pandemics, we have more information on how to treat viruses that has led to a certain control of the virus and a fast development of a vaccine. We need to bear in mind that during the last pandemic – the Spanish flu – no vaccine was used to control it, and some scientist say the virus just mutated and became less deadly over time, while other authors suggest that the virus outbreaks of 1957 (Asian flu), 1968 (Hong Kong flu), and the H1N1 of 2009 are descendants of the 1918 influenza virus. This will be the first time in history that the main policy to solve this issue (a respiratory virus) is not to wait until the virus mutates to a “milder version” of itself but to vaccinate vast majorities of the population; therefore, proper distribution of the vaccines as well as rapid manufacturing will play a big role in how fast things go back to normal for and, especially, for business strategists. If fast implementation is not realized, more shutdowns can be expected, or at least some sort of social distancing. This can affect some industries as tourism drops or event cancelations become more common.

Liquidity. Debt has risen at an enormous pace this year and that trend will remain for most of 2021. Most policymakers had stated that by this time of the year, liquidity should not be an issue because we would be back to a “new normality” and the measures taken by central banks to lower interest rates would be sufficient for COVID-19. At least, that was the major thinking during the first months of the pandemic. Only in Mexico, CEPAL estimates that more than 500,000 business will shut down in 2020, and we have witnessed that no country or industry is resilient in the face of a nine-month lockdown and a probable new lockdown after the December Holidays. Lowering rates has proven ineffective, mostly because the rate of default is so high that even though banks can borrow money almost without cost, there are a very few companies and individuals to which banks are willing to risk lending money under these specific circumstances, and there is a limited number of opportunities where this money can be invested. The lack of liquidity will not only become the major concern of both business and governments but also the main opportunity as prices, especially of real estate, have dropped or at least stabilized after several years of continuous surge.

2021 will not be an easy year, but at least it will be a more predictable year than 2020. All the expectations we had in 2019 about 2020 have proven wrong. For 2021, at least we have some clarity on where we should keep our main focus and what we can expect from policymakers worldwide.