Covid 19 coronavirus: Threat of catastrophe stalks developing world

Impoverished Indians receive food distributed by a Hindu religious organization in Prayagraj, India. Photo / AP

Wara Mendoza sells remote controls in El Alto, a sprawling and impoverished satellite city of the Bolivian administrative capital, La Paz. Her mother hawks salteña meat pies in the outdoor market and her father drives a taxi along its streets. Now, with armoured vehicles in the neighbourhood imposing a lockdown, none of her family is supposed to be outside.

"I understand the fight against coronavirus, but it is hard to enforce in a place where we need to go to sell every day in order to eat," says the 25-year-old, who is one of millions of Bolivian workers struggling to survive as the informal economy lurches to a standstill.

After weeks in which prosperous countries from Italy to the US have battled both the pandemic and its economic fallout, the fight against coronavirus is moving to a new front. Across Africa, Latin America and much of Asia, governments with far less firepower than their western counterparts are figuring out how to keep the pandemic at bay and their economies afloat.

It is not clear they can do both. With Europe and the US, the virus arrived first, forcing a public health response, and then — as the enormity of the crisis struck home — a massive fiscal and monetary injection. In much of the developing world, the sequence has happened in reverse, with the economic devastation of coronavirus arriving before the epidemic itself.

Soldiers stop a woman to show her identification at a check-point in La Paz, Bolivia. Photo / AP

States that were already financially stretched have been hit by the sudden stop of global economic activity, depriving them of the wherewithal to mount anything like a western-style response. Oil exporters in Africa and Latin America have watched the price of Brent crude collapse from $70 a barrel in January to less than $30 this week, leaving their budgets in tatters.

Emerging market assets have been dumped on a scale never seen before. According to the Institute of International Finance, foreign investors have withdrawn $95bn from stocks and bonds since they woke up to the crisis on January 21. That is four times the outflows in the same period after the start of the 2008 global financial crisis.

As capital is pouring out, remittances — the lifeblood of economies from the Philippines to Nigeria — are dwindling. Many foreign workers in western cities, especially those working as hotel staff, chefs or drivers, have lost their jobs.

It does not stop there. With flights cancelled, Kenyan farmers can no longer sell cut flowers or mange touts to European supermarkets.

Tourism has collapsed. Sites such as Machu Picchu in Peru are closed. East Africa's game parks are deserted. In Thailand, keepers say that without tourist revenue to pay for food their elephants risk starvation.

India was already in a protracted slowdown when the country's coronavirus caseload began to climb at the start of March. But Prime Minister Narendra Modi's abrupt decision to impose a 21-day nationwide curfew has thrown the economy into a tailspin.

Mr Modi gave no warning of the impending lockdown, making it impossible for businesses to maintain even skeletal operations. That has ruptured supply chains for essential items such as food and pharmaceuticals, soap and disinfectant. Capital Economics forecasts that India, with its 1.4bn people, will grow at just 1 per cent in 2020 — that would be its worst performance in four decades.

Even in Brazil, where President Jair Bolsonaro has scoffed at the virus as a mere "sniffle", governors in regions covering 200m of the country's 210m people are closing non-essential businesses and calling on people to stay home.

After the economic crisis came the virus itself. Africa, which had practically no cases a month ago, now has more than 7,000, with clusters of infections in almost every one of its 54 countries. Cases in Brazil alone quadrupled in the past week to more than 8,000.

NeedToKnow3

While that is still behind Europe and the US, the numbers are rising rapidly and public health experts worry the pandemic could tear through tightly packed slums and informal settlements in some cities.

Nor do poorer countries have robust health systems. Africa is the worst off. Governments on the continent spend an average per capita of $12 a year on health compared with $4,000 in the UK, according to the OECD. "Everybody is talking about ventilators," says Ngozi Okonjo-Iweala, a former Nigerian finance minister. "I hear some countries have less than 100."

Some experts hope that generally younger populations will limit the number of fatalities. Africa has a median age of 19.4 against 40 in Europe. Of the continent's 1.2bn people, only about 50m are over 60. In India, the median age is 27. In Latin America, 31.

There is also speculation that the virus might spread more slowly in hot and humid climates, though evidence for this is patchy. Set against that are the number of people who are malnourished or whose immune systems are compromised by HIV and other conditions, especially in Africa. That could mean the death rate is actually higher. Bill Gates has warned that 10m people could die in Africa if the virus is not contained, while Imperial College London estimated the global death toll — which at the moment is under 60,000 — would have reached 40m had the world not responded.

Police remove foreign migrants from the Central Methodist Church in Cape Town, Sourth Africa. Photo / AP

That leaves developing countries struggling to figure out how to balance the public health response with the risk of economic collapse. Cyril Ramaphosa, South Africa's president, last week imposed a three-week lockdown before a single coronavirus death.

In Nairobi, Kenya's capital, authorities have stopped short of a full lockdown, instead imposing social distancing and a nightly curfew. Patrick Gathara, a Kenyan political cartoonist, wonders if a western-style shutdown is sustainable or whether people will rebel. "It's all very well to say lockdown, but what does it mean if people are starving in their houses?" he asks.

Dele Olojede, a Nigerian Pulitzer Prize-winning journalist now living in South Africa, says he understands the dilemma. "In shantytowns or townships people don't have the wherewithal to stockpile food and social isolation is physically impossible," he says. Yet he still thinks that lockdowns of limited duration may help buy time.

He has been impressed at the decisiveness of the South African government, which last week sent out a fleet of 67 shiny white coronavirus-testing vans capable of processing results in 45 minutes. In Nigeria, which was quick to snuff out an Ebola outbreak in 2014, authorities were carefully scanning patients at Lagos airport in February when travellers were still breezing unchecked through US airports.

Still, Ricardo Hausmann, a Venezuelan development economist at Harvard University, is not holding out great hope. "The situation in the advanced economies is likely to be much more benign than what developing countries are facing."

Ms Okonjo-Iweala, now chair of Gavi, the Vaccine Alliance, says the health and economic impacts are intertwined: "If we don't deal appropriately with the health part, the economics are going to fall completely apart."

She is impressed by the range of measures mustered on her own continent, including emergency spending, tax cuts and experiments with quantitative easing. Some African countries are planning mobile money transfers to people struggling to survive.

"But if you look at the extent of the measures they've taken, it's about 0.8 per cent of gross domestic product," she says. "They don't have the fiscal space to be able to do very much. For these countries to come out of it, you need to look at something like a stimulus in the range of those mounted in the west — say 10 per cent of GDP."

Cemetery workers bury a person in Sao Paulo, Brazil. President Jair Bolsonaro scoffed at the virus as a mere 'sniffle' but regional governors are closing non-essential businesses. Photo / AP

Kristalina Georgieva, managing director of the IMF, estimates that emerging countries may need as much as $2.5tn in support.

If the magnitude of the crisis for developing countries is far worse than in 2008, so far the international response has been less impressive. Rich countries have battened down the hatches as they fight the pandemic themselves. The US and China, the two global superpowers, have bickered over the cause and origin of the global spread, hampering an international response.

The IMF has taken some action, making $50bn available in quick-release funds for which 85 countries have already applied. Unctad, the UN's trade and development agency, is calling for an immediate issuance of $1tn in new special drawing rights, a proxy for foreign reserves, and for the richest countries to pool their allocations and make them available to the poorest.

Richard Kozul-Wright, Unctad's director of development strategies, says advanced economies should see this not as a humanitarian gesture but as an act of self-insurance. "If the outbreak really does catch hold in the south, there's no way the advanced economies will be able to stop the blowback."

Vera Songwe, executive secretary of the UN Economic Commission for Africa, worries that food inflation could spark riots across the developing world. She is disappointed with the global response. "If we need an example of what the lack of multilateralism looks like, we're seeing it today," she says. "If one of us has the virus, all of us have it."

Mr Hausmann says developing economies have been left in the lurch both in terms of their ability to fight the pandemic and to counter its economic impact. Even in the best of times, he says, they are financially stretched. "And these," he points out, "are not the best of times."

Written by: David Pilling and Jonathan Wheatley in London, Andres Schipani in São Paulo and Amy Kazmin in Delhi

© Financial Times