COVID-19 and supply chain disruptions: A novel perspective using a network of payments in Brazil

This paper examines the impact of the COVID-19 pandemic on the Brazilian supply chain using an innovative approach that leverages firm-to-firm payment data. Using a proprietary data set from the Central Bank of Brazil, comprising more than 370 million real-time transactions through Pix, wire transfers (TED), and billing documents (boletos), we reconstruct the country’s production network and estimate the propagation of pandemic-induced shocks. Through a difference-in-differences strategy, we show that inland firms more reliant on partners located in capital cities experienced sharper declines in transaction volumes, highlighting an asymmetric effect in which suppliers were more severely affected than customers. We also find evidence that firms adapt their trading relationships by shifting connections away from more exposed urban centers to inland regions. A complementary network analysis reveals that this reconfiguration resulted in a denser, more decentralized supply chain structure. These findings not only enhance our understanding of shock transmission in production networks but also provide actionable insights for designing effective industrial policies and improving supply chain resilience in future crises.