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Colombia and Argentina are victims of their own early success. Their only policy tool is quarantine, a blunt and damaging instrument that will render lasting damage to the economy and push millions into poverty. Here Colombian capital Bogota. (Photo: Bogota Mayor's Office)
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Thursday, July 23, 2020
Perspectives

Latin America & COVID: Economic Ruin or Save Lives?


In much of the Americas, COVID-19 will burn out before vaccines arrive.

BY JOHN PRICE

In this highly politicized and naturally pessimistic time in our history, the following article will prove polemic to some. For any of you who have lost family or friends to COVID-19, please accept our condolences. When a pandemic befalls us on a personal level, national or regional statistics provide little consolation and may prove irksome, if not insulting.

But statistics do matter and sensible analysis of them is vital to our understanding of the 2019 version of the coronavirus.

Our team at AMI includes no epidemiologists nor medical doctors of any kind. We make no claims to be health industry authorities. However, we are seasoned Latin America analysts and, given the sheer volumes of public data related to COVID-19, it is incumbent upon us to try to analyze this data and extrapolate the future spread of the coronavirus in the Americas. Only then, can we begin to forecast the economic future of the region. I reiterate: the goal of this article is to help predict how the coronavirus will impact Latin American populations and their economies. It is not intended to influence policy or guide people’s individual actions. We have no agenda but to predict the future.

When Do We Reach Herd Immunization Threshold?

Seven months after COVID was first detected in Wuhan, the world has climbed a steep learning curve and today we have a much better understanding of what drives the spread of the virus as well as what will end it.

One of the important lessons learned relates to the notion of herd immunization. Early on in this crisis, it was widely published that the COVID-19 Herd Immunization Threshold (HIT) was reachable via two means: widespread vaccination or the infection of approximately 60 percent of the population, based upon the level of contagion of COVID-19, measured at a Ro of 2.5, which means that for every person infected, 2.5 others will be infected. (Ro, pronounced R-naught, is the reproduction number, a metric used to describe the intensity of an infectious disease outbreak. The formal definition of a disease’s Ro is the average number of cases that an infected person will cause during their infectious period.) The seasonal flu has a HIT that is closer to 45 percent, significantly less than the 60 percent threshold. In either case, once the HIT is reached, the virus burns out, unable to pass to a new host.

However, the 60 percent HIT level is based upon a mathematical theory that implies that the entire population is homogeneous, connected and spread evenly apart. In reality, our societies are not like that. Scientists from Oxford, Virginia Tech, and the Liverpool School of Tropical Medicine, published the following report that shows how the natural variances in the population help dramatically lower the herd immunization threshold.

Another explanation for a much lower herd immunization level in practice is the strong likelihood that much of the population has been exposed to other coronaviruses in the past. Another multi-author study showed that up to 81 percent of us can mount a strong response to COVID-19 without ever having been exposed to it before.

In a similar study recently published in Sweden, it was concluded that “roughly twice as many people have developed T-cell immunity compared with those who we can detect antibodies in.”

This was already suspected after the coronavirus spread in a ‘real life laboratory environment’ on the Diamond Princess cruise ship, when only 17 percent tested positive, implying that the remaining 83 percent were somehow protected from the virus. Some worry that the antibody count of those infected by COVID can rapidly deplete, as the results of a King’s College study of March/April 2020 victims showed when their blood was analyzed 3 months later.  But in a well-argued Atlantic magazine rebuttal of the dire headlines that appeared after the Kings College study came out, one of clearest counter-points was: “When you look at something like the smallpox vaccine, you see the antibody response is down about 75 percent after six months. But that’s a vaccine that works for decades.”

In most countries, 70+ percent live in urban areas where viruses spread easily, but these city centers are separated by rural areas, allowing viruses to burn out locally if movement is limited, which lockdowns help facilitate. As a result of all of these factors, viruses tend to burn out at much lower levels of infection than theoretical models suggest. In years when the flu vaccine does not work, the latest strain burns out after 10-15 percent of the population is infected, far below the theoretical HIT level.

According to the World Health Organization, the seasonal flu season of 2017, a particularly dangerous strain, killed 1.2 million people worldwide, or approximately 0.1 percent of the 15 percent of the world’s population that was infected. COVID appears to be 3X more deadly than the 2017 wave of influenza, and about 6X more deadly than a typical flu season, killing closer to 0.3 percent of those infected.

Even the Spanish Flu of 1918, which had a RO of 2.0, died out at 20 percent infection levels, not the 55 percent theoretical level.

Some refer to this lower (and more realistic) threshold as the Disease Breaking Point (as opposed to herd immunization, the theoretical level). According to lessons learned from past pandemics and especially deadly years of the seasonal flu, the Disease Breaking Point (DBP) of COVID-19 should be achieved when 15-20 percent of the population becomes infected. 

In parts of Europe that were overrun by COVID-19 (Belgium, Spain, and Italy) and cities like New York, the daily death toll (as of late July 2020) has trickled to a handful per day — this in spite of widespread lifting of lockdowns and a partial re-opening of borders. Health officials in these jurisdictions accept that their populations have reached or are within spitting distance of their DBP (Disease Breaking Point). Their tragic experience provides invaluable lessons for the rest of us.

FOUR NATIONAL SCENARIOS

The ravages of COVID-19 have been felt across the world unevenly. In some countries like Taiwan, Korea, Singapore and China, early containment was successful. In others, lockdown measures combined with aggressive testing have brought the virus under control. In yet other jurisdictions, slow detection, early mistakes and high population density, among other issues, led to catastrophic levels of impact. To simplify our analysis, we divide the world of nations into four groupings.

Group 1: Small Island Nations

COVID-19 containment has been most consistently achieved in low- to mid-populated island nations, who can isolate themselves from the rest of the world in a matter of hours. They are normally governed by one central health authority. As island nations, they have a strong sense of unity when threatened from abroad — which in turn helps engender social compliance. These traits are similar across almost all island nations, regardless of their level of wealth, education, or any measure of economic development.

The very low COVID-19 death rates in these island nations indicates a correspondingly low infection rate. These countries are far from achieving their DBP (Disease Breaking Point) and will therefore need to remain closed, or very vigilant of who enters their country, until a vaccine can be deployed. That is a challenge for island nations that rely on tourism to drive their economy but polls taken in these countries demonstrate widespread support for continued isolation until a vaccine can protect their populations.

Group 2: Containment Success

If you are not fortunate enough to live on a relatively small island with a strong central government, what is your COVID future? Every country in the world, including Sweden, has implemented social distancing, introduced testing and bulked up their healthcare infrastructure but results have varied dramatically.

Having gone through or witnessed the scare of SARS, China, Japan, South Korea, Malaysia, Thailand and Singapore acted quickly and were well-equipped to track and trace the virus, as well as handle any surges in hospitalization. The tactics used in lockdowns varied demonstrably with China strictly quarantining the entire Hubei province (with a population of 58.5 million) for three months and continuing to trace the movements of all of its citizens. The more democratic Japan, Korea and Singapore relied on technology and citizen compliance to contain and trace the virus.

Outside of eastern Asia, there are several other countries that have done a remarkable job of containing the spread of COVID-19, including some unexpected jurisdictions. In North Africa, Algeria, Morocco and Tunisia, all managed to lock down their populations and keep the COVID death toll to modest numbers. People residing in those countries join a privileged list of 15 nations outside of the European Union that can fly to the EU as of July 1st, 2020. 

The Levant region includes the containment success stories of Israel, Jordan, Lebanon and Cyprus (which was cited among the island nations above). Highly strict lockdowns in these countries was the key to their containment success.

Two interesting anomalies (for their respective regions) made the coveted list of nations that can fly to Europe: Uruguay and Rwanda. Both are small nations known for exceptional levels of governance in regions where governance tends to be weak. The only other Americas nation on the European welcome list is Canada, which proudly points to its mortality rate (per capita), which is 45 percent below that of its omnipotent neighbor, the USA. But it was Canada’s falling case numbers that convinced the Europeans to grant Canada flight access to the continent.

Most of the remaining containment success stories are located inside Europe, the continent that has simultaneously witnessed COVID’s greatest tragedies. This dichotomy speaks to the difference that national health policy can make to containing COVID-19. Mistakes made in Belgium, Italy and Spain helped guide policy in more successful countries like Germany, Finland, Greece and Estonia.

The challenge for these successful nations that have suppressed COVID is how to foster an economic rebound while waiting for a vaccine. In the USA, states like Florida, Texas and California, which kept death counts at a reasonable level back in March and April, are now witnessing growing mortality rates after lockdowns were lifted. Could the same reversal happen in Canada, Greece, Finland or Germany? The key defense strategy appears to be aggressive testing and tracing, which some countries are better prepared to manage than others.

The Rest of the World

A majority of the world’s nations — including the US, much of Latin America, Africa, South & Central Asia — are ill-prepared or simply too late to contain the coronavirus. Most of these countries will reach their Disease Breaking Point before vaccines are widely deployed. This reality is a double-edged sword. It means that millions more will die, especially in South Asia. It also means that these countries will be effectively inoculated against any 2nd wave of the coronavirus. Ironically, these nations, which failed to contain the virus, may see their economies fully open ahead of those who succeeded in suppressing the coronavirus.

In Latin America, this is a tough reality pill to swallow for countries like Colombia, Chile, Argentina, Peru and much of Central America, countries which carefully followed WHO guidelines, exacting a massive economic and mental health toll on their societies. In a consumer survey that AMI conducted in early June 2020, it was clear that the downside economic impact of strict quarantines in Colombia was greater than the economic side-effects of less rigid policies in Brazil and Mexico.

With anywhere from 40-80 percent of its workforce informally employed, Latin American economies cannot function in lockdown mode. Not only are few jobs transferable to home, but there is no social safety net in place for the informally unemployed. Many emerging markets around the world share this dilemma. According to the IMF, 92 percent of India’s workforce is informally employed with no written contract, paid leave or other benefits. 

Without the financial ability to sustain lockdowns, it becomes very challenging to implement an effective testing & tracing program. Across Latin America, people are again working from street stalls, sharing crowded sidewalks, shopping inside stores. How can one trace ones contacts from the time of infection in such an environment?

Group 3 – Past the Point of Return

About three-fourths of Latin Americans live in countries that suffered an early infection surge. Hospitals were overwhelmed in cities like Guayaquil, Mexico City, Lima, Sao Paulo, and Manaus. In Mexico and Brazil, contrasting policies pursued by national versus regional governments led to confusion and a rapid spread of the coronavirus.

Based upon our modelling analysis, we believe that Ecuador, Peru, Chile and Brazil have passed the mid-point of their path to their respective Disease Breaking Points. In these countries, a lot of pain still awaits before COVID-19 burns off. In the case of Mexico, daily deaths are only now beginning to peak. Mexico will be the epicenter of Latin America’s COVID healthcare crisis for the next month or two.

Italy, Spain, and Belgium are very close to full DBP. Of course, there will be under-exposed pockets of the population whose later infection may lead to unexpected deaths but as a whole, these jurisdictions should be able to safely open their economies, their schools, etc.

Though our statistics are based upon national averages, it is worth remembering that the early infection surges were concentrated in those cities where travelers brought the virus from abroad. For this reason, some major cities across the Americas (New York, Washington, Guayaquil, Lima, São Paulo, Manaus, Santiago) are close to or have reached the Disease Breaking Point, even if the rest of the country remains further back on the infection curve. This geographical imbalance of infection levels within a nation has led some countries to enforce internal borders: In Canada, the province of Ontario closed its border with Quebec, in the US, some states have imposed quarantines on visitors from others, while in Mexico, volunteer militias have been seen enforcing perimeters around their uninfected municipalities.

In physically large countries like Russia, Canada, China, Brazil, USA, and India, accurately forecasting the spread of COVID-19 really must be done at a sub-regional level. Case in point is the US, where COVID-19 has reached its DBP in New York, New Jersey and Connecticut but continues to spread in Texas, Arizona, California and Florida.

As we have witnessed in countries like Italy and Belgium, reaching the DBP (Disease Breaking Point) enables a country to open its economy, its schools, even its borders without fear of endangering its population. That is the promise that awaits these countries, which, by a combination of poor choices and unfortunate circumstances, allowed COVID-19 to infect 10-20 percent of their population. Vaccines will be deployed and will provide additional peace of mind to these societies but policy makers may loosen restrictions and even open borders before vaccines arrive. 

Group 4 – Compliant but Under-Resourced

The fourth group of nations are those that rapidly drove their 1-2 infected cities into lockdown, hoping to contain the coronavirus. Having failed to fence in the virus, national quarantine efforts were instrumental in keeping infections and death counts relatively low (in some cases below the mortality rate of the 2017 flu). However, these countries lack the resources and technology to effectively test and trace new cases as they arise. Furthermore, these are developing economies, with large proportions of the labor force working informally, jobs that cannot be sustained under lockdown.

In Latin America, this group of nations is led by Argentina and Colombia. Both countries have been both lauded for their containment of the virus but economically devastated by lockdowns.  We now know that quarantines disproportionately hurt the working poor who rely on jobs that cannot be brought home, have anemic savings, and are connected to the web by only their cellphones. The longer an emerging market is in lockdown, the wider the gap builds between the haves and have nots.

Argentina began loosening quarantines on June 7th, only to see new cases and death counts climb, leading to a renewed lockdown, extended till July 17th. In Bogota, Colombia, Mayor Claudia López began the capital’s reopening on June 15, but as cases climbed steadily and ICUs neared capacity, the Mayor decided that ¾ of the city must re-initiate 15 days of quarantine in staggered fashion from July 13th to August 23rd. What these policy decisions reveal is how far both countries are from reaching their Disease Breaking Point and therefore how vulnerable the population remains to COVID because of the lack of viral exposure.

Colombia and Argentina are victims of their own early success. Their goal remains holding out till vaccines arrive. But without the ability to test and trace on a grand scale, their only policy tool is quarantine, a blunt and damaging instrument that will render lasting damage to the economy and push millions into poverty. They are not alone. Most of Central America, the Guianas, India and South Africa face the same frustrating path ahead.

This fourth group of nations ought to be at the front of the line for the future deployment of vaccines. Sadly, that will not happen. It will be private sector developed vaccines that reach the market first and sold to the highest bidder – i.e. wealthy nations, including many that will not really need vaccines by then. By the time vaccines reach third-tier cities in Colombia, Honduras, or South Africa, those populations will have either suffered their way to the disease breaking point or become impoverished holding out under lockdown.

ECONOMIC RUIN OR A HIGHER DEATH COUNT – THE POLICY DILEMMA

Besides Uruguay and a handful of island nations which may be able to hold out for another year before vaccines arrive, the rest of Latin America faces an awful trade-off: maintain quarantines and save lives or loosen regulations to save the economy. In March 2020, as lockdowns took effect, there was broad voter support (often over 80 percent) for quarantines in every country in Latin America. As lockdowns persisted, polls reveal that many believe that quarantines are not respected by the general population and therefore not very effective.

Quarantines were originally justified to bend the curve of new infections and prevent the overwhelming of hospitals. Behind that approach was the understanding that there is no way to stop a virus, only to slow its spread. Yet many leaders around the world have tried to stop COVID, to put it out as though it were a forest fire, inspired by the successes of countries like Korea and Taiwan.  Such a strategy might be viable in small island nations and in well-governed, compliant nations where testing and tracing can be aggressively employed. But sadly, snuffing out COVID is not a realistic outcome for 97 percent of Latin Americans (Groups 3 & 4 in our analysis). Vaccines will save some lives if they arrive by the end of 2020. For most, vaccines will arrive too late to save the vulnerable and well over 100,000 more lives will be lost to COVID in Latin America before the disease burns out.

This article is based on an analysis originally published by AMI Perspectiva.

John Price is the Managing Director of Americas Market Intelligence. With 20 years of experience in Latin American market intelligence consulting, Price has supervised nearly 1,200 client engagements and advises clients in more than 20 countries across Latin America. He can be reached at jprice@americasmi.com

 

 

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