Consulting Report Series <COVID-19: The Vaccinated World 2021 Risks and Opportunities in Americas>

The Americas

Christopher Coppock & Mariana Roa Vargas

29 January 2021


Introduction

Across the Americas, COVID-19 has posed unique and shifting challenges for governments, with corresponding responses and mitigation efforts occasionally as challenging for businesses as the pandemic itself. In the United States and Canada, the combined governments have spent trillions of dollars supporting unemployed workers and struggling businesses. In contrast, many of the poorest Central American, South American, and Caribbean countries have not been able to provide meaningful economic relief, experienced the collapse of their health systems during the first wave, and are now reeling from a resurgence of COVID-19.


For all but a handful of countries across the Americas, meaningful vaccination rates remain a distant hope. This report concerns the four countries with the largest GDPs in the Americas; Brazil, Canada, Mexico, and the United States. It explores the varied economic and social efforts deployed to limit the pandemic’s spread and considers how vaccination campaigns may impact specific industries during the first two quarters of 2021. The report is organized in a North-South fashion.


Canada

Hygiene Measures and Economic Responses

Canada leads the world in the number of vaccines procured - more than 300% of the population - but this preparation has not resulted in them being rapidly administered. By mid-January 2021, Canada had administered less than 600,000 vaccines, barely 0.25% of its population assuming a two dose regimen. Even in a best case scenario, Canada’s government does not forecast achieving the inoculation rates required for herd immunity until late 2021. Thus, for at least the first six months of the year, businesses should expect Canada’s current COVID-19 mitigation policies to be continued and, where necessary, reinforced.


Canada’s policies have been effective by the standards of western countries, resulting in 80% fewer cases per million of population than the United States, and 25% less than Germany. The response has been led by the provinces and regional health officials, with the federal government focused on providing supplies and managing border closures. Contrary to the United States, there have been unified views at both local and central government regarding the seriousness of the coronavirus and the need for collective action to limit its spread. These measures, almost all of which remain in place, have included the closure of schools and non-essential businesses, limiting social gatherings, strict quarantine requirements for travel, and fines for nonadherence.


However, as of early January, Canada remained in the grips of a second COVID-19 wave, with the rolling 7-day case average increasing more than 25% over the first two weeks of 2021. As the lengthy Canadian winter keeps the majority of the population inside for the coming months and compliance with existing restrictions falters, the current measures will likely need to be maintained or strengthened to prevent healthcare systems from being overwhelmed.


Vaccination Plan

Canada’s government expects to achieve herd immunity by the beginning of autumn 2021 and will rely on the military to support provincial distribution and administration plans, intended to ensure there is no shortage of manpower or expertise. Canadian politicians at all levels are broadly supportive of the vaccination program regardless of political affiliation, though the timeline does mean that businesses should not expect loosened physical distancing restrictions before late summer. Of note, Canada will not produce any vaccines domestically, and will rely on imports of the BioNTech-Pfizer, Moderna, and Astra-Zenica vaccines. This reliance on external manufacturing has already led to unforeseen delays in vaccine delivery, though without impact yet on the target for herd immunity.


Sector/Industry Assessment

A key determinant for the pace of Canada’s recovery will be how the oil and gas industry performs. The federal stimulus provided to the sector will support it through 2021, but its long term vitality will be determined by factors including air travel recovery, petroleum protectionism in foreign markets during recovery, and regulation. Because the sector accounts for 6.2% of Canada’s GDP and the government is committed to ensuring its survival, efforts to focus on green energy investment as a central component of economic recovery will experience stiff headwinds.


Separately, vaccination rates in other western countries will need to be closely watched. Around 2% of Canada’s GDP is generated by tourism, originating mostly from the United States and Western Europe. Given the stringent measures Canada has used to manage the pandemic to date, businesses and travelers should expect vaccines to be required by Transport Canada for non-exempt travelers to enter the country. Because of this, in order for tourism to begin a recovery, Canadians will hope that other western countries achieve meaningful vaccination rates at a similar pace.


Canada experienced an estimated and unprecedented 5.5% decline in GDP during calendar year 2020, and the economy remains in the grips of the pandemic. There should be little expectation for improvement during the first two quarters of 2021. Thereafter, whether the economy can recover to a net GDP gain in 2021 will be determined by whether Canada’s government can meet their herd immunity targets on schedule.


USA

Hygiene Measures and Economic Responses

The COVID-19 pandemic in the US has been met by a wide range of responses, implemented at different times and to varying degrees, by all fifty states. Until a vaccine program, also reliant on individual states, achieves the levels of inoculation required to reach herd immunity, businesses will need to adapt to changing and complex regulations. These will be driven by both the sanitary situation and expectations of different political constituencies across the country. The uncertainty resulting from this decentralized approach will be compounded by factors that have yet to, or are just now, being understood. The new, more transmissible COVID-19 strain which originated in the UK and has now been found in Colorado and California, is one example of a factor that might create new divergent responses among states.


Federal action has been largely limited to economic stimulus. Following the $2 trillion CARES Act passed in March 2020, which included direct payments to Americans, beefed up unemployment compensation, state and local government aid, and support for small businesses, the US Congress passed a new $900 billion stimulus at the end of December. The latest bill focuses on extending key life support measures

for the unemployed and businesses, many of which, however, are only extended through mid-March of the new year. Two areas where the latest bill makes targeted investments that create opportunities for businesses are $300 million for broadband development to support remote work and learning, and $35 billion for clean energy projects.


Vaccination Plan & Economic Impact

Inoculations in the United States are currently below the rate required to reach forecasted herd immunity by summer 2021, and as a result, the next six months will look much like the majority of 2020. Vaccine procurement will not be an issue for the United States, but distribution and administration has and will continue to create challenges. Lack of federal models to follow left underfunded state health departments to cobble together vaccination plans for their populations by trial and error. In many cases, states have deferred to county health officials and even individual hospitals to coordinate the actual administration of the vaccine. The ensuing disorganization has led to confusion, conflicting information, and in some cases, doses expiring because enough candidates for the vaccine were not found.


While the incoming Biden administration has been clear in its commitment to focus enormous federal energy on the vaccination campaign, directing the Federal Emergency Management Service and National Guard to assist in the running of thousands of vaccination sites, the majority of the vaccination legwork will still need to be done locally. This means the most significant impact the new administration can have involves shepherding additional funding legislation through Congress. Any additional funding to help coordinate and administer doses, however, will need the support of a narrowly Democratic Congress that is juggling multiple pressing demands at once.


The speed with which vaccines are administered, and the amount of problem-solving muscle the federal government can provide, will be directly related to whether the new administration can balance these demands with the new administration’s policy priorities. If the government fails to swiftly complete the trial of former president Trump, the confirmation of Biden’s Cabinet nominations, and fraught negotiations over an organizing resolution for the Senate, the resulting federal inattention may drag vaccinations out into the final months of 2021. Given the extreme political polarization in certain states there will also be opposition to the level of cooperation necessary to develop thorough coordination across federal and state governments. As a result, businesses should expect the United States to face several more difficult months in the grips of the pandemic.


Mexico


Hygiene Measures and Economic Responses

Mexico uses a traffic light system which takes into account 10 measures (based on the number of COVID-19 infections, related deaths, and hospitalizations) to determine the risk of infection on a state by state basis. According to the assessment, states have to restrict - or not - their economic activities (closure of restaurants, retail, and leisure facilities, etc). Moreover, each state and municipality has the option to impose further restrictions. Mexico's death toll is on the rise and kept breaking daily records the third week of January 2021, being the country where most medical staff have died. After Christmas the government increased the number of hospital beds in the capital as the healthcare system was on the verge of collapsing (Mexico City still reported a 89% of hospital occupancy on January 12, 2021).


Unlike other global leaders, Mexican president Andrés Manuel Lópes Obrador (AMLO) has not started a robust stimulus program to efficiently support businesses or the unemployed during the pandemic. Without such a plan, shutting down cities across the country - especially in the middle of the holiday shopping season - implies dramatic consequences on the nation’s economy which faces a GDP shrinkage of around 8.9%. On a local level, however, states have implemented resource packages to alleviate the situation such as credits to SMEs, tax allowances, and food supplies to families and people in need. Yet, these measures do not represent an integral approach on a state by state basis, are restrictive, and very limited - only 7.8% of businesses have received financial support. Moreover, schools closed in mid-March nationwide. The Secretariat of Public Education estimates that around 2.5 million students had to leave school due to the current pandemic. In Chiapas, one of the poorest states in the country, about 45% of the students have left the classroom; many lack the necessary technology to follow online courses and many parents could simply not afford to keep their children at school.



Crime Incidence

On the other hand, crime has followed a general declining trend after the national lockdown was instituted on March 23, 2020. A study by Estévez-Soto found that most declines observed in certain crimes (e.g. sexual violence) were associated with the decrease of people using public transport. Unlike all the other countries in the region, however, the number of homicides remained fairly constant after lockdown. Nevertheless, property crime has declined by a third compared to the second semester of 2019 and domestic violence has seen an increase of 60% according to UN Women.


Vaccination Plan

Mexico was the first country in Latin America and amongst the first ten in the world to receive the BioNTech-Pfizer vaccine in the morning of December 23rd with vaccination starting the next day, on Christmas Eve. Mexico, together with Argentina, further plans to produce and distribute the AstraZeneca vaccine to the Latin American region. Furthermore, according to the Mexican Ministry of Foreign Affairs, Mexico has also secured vaccines from AstraZeneca, CanSinoBio, and Gamelaya (Sputnik V), hence ensuring coverage for 119% of its population. Moreover, CanSino and Johnson & Johnson started trials in the country and Curevac and Novavax are seeking volunteers to start phase 3 trials as well. The government has assured the vaccine is going to be universal, free and will not be privatized.

Additionally, the president announced on January 22 2021, that local governments and the private sector would be allowed to buy the vaccine. Nevertheless, vaccine producers have allocated their 2021 production to other entities and experts claim that it would be impossible for the private sector and local governments to buy the vaccine. This is due to the fact that the COVID-19 vaccine has only been granted emergency use and can therefore only be used according to the national vaccination plan.

The distribution of the vaccine is planned in five stages, prioritizing (public) health-care workers at the frontline followed by health-care workers in general and people over 60 and then stepwise people over 50, over 40 and finally the rest of the population. Mass immunity is expected to be achieved by March 2022. For now, Mexico's military is responsible for all logistical matters and vaccination drills have taken place to sort out the logistics to reach indigenous populations and rural areas. Mexicans will receive their vaccinations in military barracks and mobile brigades. According to a survey conducted in mid- November 31% of Mexicans want to be vaccinated immediately, 55% would rather wait, and 10% refuse to be vaccinated.

Even though Pfizer announced in January that its production will be delayed in Mexico at least until February 15, 2021 (due to improvements in its manufacturing processes designed to boost production), Mexico still plans to adhere to its original plan and vaccinate 14.1 million people before March 31st, which would include all people over 60. Half of the promised Pfizer vaccines were delivered on January 19th (219.000 doses) and the AstraZeneca vaccine, which has been approved by the health authorities, will start being produced in the country as the substance to produce 1 million vaccines was sent by Argentina on the same day. The Sputnik V and the CanSino vaccine are also seeking authorization and the former might arrive in February to Mexico. Private health care workers at the frontline started getting vaccinated mid-January 2021 as well as teachers in Campeche (the only state in “green” according to Mexico's COVID-19 traffic light system) with the hope that classes can go back to normal in February.

There are of course, potential domestic issues with the vaccination campaigns as organized crime in the region represents a severe threat. The drug cartels, which already have distribution channels on the black market and the ability to make profit from the product, might steal the vaccines or adulterate them as a way to diversify their portfolio. The tensions between AMLO and many Mexican opposition governors - and even some of his fellow party members - are another threat to the vaccination campaign since the vaccine could represent a political bargaining chip for next summer's legislative and regional elections.

Long-run policy changes

While the vaccine will restore some normality, these are certain policies which have been introduced that are expected to remain after mass immunity is achieved:

  • A reform was passed by congress obligating businesses to regulate home office activities such as who should pay for the services that workers use (i.e electricity and internet), when working from home, as well as the times and conditions in which workers should be connected. The reform came into effect on January 12, 2021.

  • COVID-19 was recognized as a work illness for essential workers, allowing them to receive a disability payment covering 100% of their salary from day one (as opposed to the usual disability payment covering 60% of the base salary and which starts from the 4th day on). However, critics fear that the measure will incentivize employers to fire their high-risk employees.

  • Efforts of local governments to disseminate emergency numbers and raise awareness about services provided by the authorities supporting gender-based violence has not only brought attention to the issue but increased efforts to create a strong network to assist victims. A clear example is the Iztapalapa municipality in Mexico City that launched a campaign as part of the Urban Safety Governance Initiative led by the United Nations Office on Drugs and Crime (UNODC); the campaign is likely to be replicated across the country.


Sector/Industry Assessment

As was the case in countries around the world, home-office is strongly encouraged in Mexico, yet only about 20-23% of the population (and notably more men than women) can afford to work from home. Informality in the country represents as much as 56,3% of the working force leaving little to no choice to workers but to risk their lives everyday to assure an income.


Moreover, 64% of the Mexican economy depends on the tertiary sector (services) and relies heavily on tourism, hence making the vaccine vital to revive the economy. The lack of activities in the tertiary sector has particularly affected women, who represent 53% of the working force in that sector.

However, Mexico has a strong production capability in the pharmaceutical sector and the world’s eighth-largest exporter of medical devices. While China is another important supplier, their supply chains were disrupted in early 2020 and many companies seek to diversify their portfolio, hence giving Mexico an opportunity to position itself in the industry.


For the upcoming months Mexican exports will likely be on the rise. The total number of exports increased by 11% in December 2020 compared to December 2019; signalling a post-pandemic recovery. The manufacturing and mining sector increased by 13.6% and 16% respectively. The agroindustrial products together with the agribusiness sector and the assembly and automotive industry will push the Mexican exports. The domestic market (domestic trade, services, food sales) will grow very slowly in the first quarter of the year.

The fall in the oil price in April 2020, an industry which represents 17.9% of the mexican economy, shook the country as the price of the Mexican blend dropped around 80%. The price of the Mexican blend seems nevertheless to be on a recovery path in 2021, as the price increased from US$12.23 per barrel in April of 2020 to an average price of US$49.52 in January 2021.


Organized crime has been able to profit during the COVID-19 pandemic. The supply chains do not seem to have been severely disrupted in 2020 and faced with the difficulties of entering the U.S. market, the cartels opted to consolidate and expand Mexican consumption. Drug dealing is on the rise; from January to October, state prosecutors' offices opened a total of 63,889 investigation files for drug dealing, an increase of 8.2% compared to the same period in 2019. Moreover the cartels are diversifying their portfolio; oxygen is, according to the Secretary of Interior, Olga Sanchez Cordero, already being trafficked by organized crime and vaccines might be next.


Brazil

Hygiene Measures and Economic Responses

The nation has the second-largest death toll in the world. President Jair Bolsonaro has repeatedly played down the risks of what he calls the "little flu" and has even joined anti-lockdown protests, claiming the measures are “dictatorial”. Since the pandemic began, two health ministers have left their posts for not agreeing with the president on the measures that shall be implemented in the country; the first one was fired and the second one resigned. Indigenous communities have been among the worst affected (with mortality rates being twice as high in indegenous communities as among the general population) since misinformation ruled and hospitals were far away from the communities.


Given the lack of preventive health measures by the government, states and cities decided to adopt their own measures (closure of restaurants, retail, and other non-essential services). However, these were met by protests across the country and data showed that compliance decreased with time.


There was a significant decrease in homicide level after the start of lockdown, which reversed the upward trend observed during the first quarter of 2020.


Vaccine Roll-Out

While the government has released a roll-out plan, it lacks a clear timeline and a detailed assessment of the available doses. The presented plan consists of four phases. The first three phases will constitute the vaccination of 49,650,255 people and started earlier than expected on January 17,2021. This came just as a new and more contagious variant of the coronavirus was found in Manaus, the capital of Amazonas, collapsing the health system as cases are booming there and across the country. The priority groups include health and educational workers, indigenous people, people over 75, those with pre-existing health conditions, security forces, transport officials, and inmates, among others. The health ministry of Brazil claims to have negotiated deals for more than 354 million doses of the vaccine for 2021, via agreements with AstraZeneca (100.4 million doses) and the COVAX Facility (42.9 million doses).

Brazil is currently rushing to import vaccines, playing catch up to neighboring Chile and Argentina where vaccination started in 2020. Anvisa, the health regulator agency, approved to import two million doses of the AstraZeneca vaccine from India on New Year’s Eve. However, the chief executive of the Serum Institute of India expected the Indian government to restrict the export of COVID-19 vaccines. Indeed the last minute diplomatic push failed, as the Indian government told Brazil they did not have any doses to spare. At the end of 2020, private clinics in Brazil struck a preliminary deal for an alternative vaccine made by India’s Bharat Biotech even though public results from late-stage trials are still missing. On January 22, 2021 Bolsonaro thanked India for providing 2 million doses of Covishield vaccine ( manufactured by the Serum Institute of India).


São Paulo mayor Joao Doria, tired of the lack of action by the federal government and a leader who is suspected to run for president in 2022, struck a deal with the chinese producer of the CoronaVac vaccine. Fourteen tons of CoronaVac arrived the evening of December 17, 2020, yet it only got the approval of Anvisa in early 2021. While Brazil’s health regulator is known for being apolitical, Bolsonaro has been appointing allies to it in recent months, hence inciting fears among health professionals that its decisions (and the delay in its decisions) may be affected by political reasons. Anvisa announced in December 2020, that China’s health authorities are not transparent in the process regarding the authorization of COVID-19 vaccines. Nevertheless, on December 7th there were rumours about Brazil buying 100 million CoronaVac doses. On January 27, 2021 Bolsonaro announced that 5,400 liters of inputs for CoronaVac were ready for shipment to Brazil.

Furthermore, Brazil plans to produce AstraZeneca’s vaccine as well as the Sputnik V vaccine. The question of when mass immunity shall be achieved remains unclear, with talks about making the vaccine mandatory since Bolsonaro’s resistance to the vaccine (he has publicly announced that it is his right to not get vaccinated) has fostered an anti-vaccine movement.

Brazil having a world-renowned immunization program and a robust pharmaceutical manufacturing capacity, could have and should have been at a significant advantage.


Sector/Industry Assessment

The pandemic is expected to plunge Brazil into another recession. At the beginning of 2020, the country had 12.6% unemployment, 5% hidden unemployment, 40% of informality, and rising inequality. The services sector, which has been hardly hit by the pandemic, is estimated to account for 70% of the nation's economy. Smaller firms are expected to be more affected as they are more likely to be active sectors with high face-to-face interactions, and where home-based work is not a possibility. State and municipal governments represent a third group which is highly exposed to the crisis. It is expected that the infrastructure sector, including energy, water, and transportation, will get special attention as they are crucial for the economic recovery due to potential contingent liabilities for the government.


Brazil might lean towards a more protectionist economy. The Foreign Trade Secretariat, linked to the Ministry of Economy, included as of January 1st 2021 syringes and needles on the list of products that need a special export license, as they are products used in the COVID-19 combat.


The country has already put in place significant measures to address the economic crisis such as relaxation of labor laws to maintain jobs, aid for informal and self-employed workers (US$ 8 billion) and financial support to states (US$ 17.5 billion). However, more needs to be done and a detailed plan needs to be put in place to assure a speedy and fair recovery.


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