Predictions about the impact of the rapid spread of infection are difficult, as they are everywhere in the world. It is quite possible that this year’s high inflation could have a greater impact on the region’s economies than the virus.
by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung
As has been the case so far in the course of the pandemic, the new wave of infection is reaching Latin America with a delay of about two months. But now with full force: At the turn of the year, the investment bank Goldman Sachs still estimated the number of infections in the entire region at 100,000 cases. But in Argentina alone, which currently seems to be the frontrunner in infections with the Omikron variant, there are currently more than 135,000 cases every day. In Brazil, there are around 100,000 cases – although the number of tests is vanishingly small and the statistics are hardly reliable since hackers crippled the computers of the state health authority.
The exploding infections are leading to higher utilization rates in hospital wards. Authorities in the countries are betting that the increase will be similarly severe but less protracted and deadly. As in the United Kingdom or South Africa. In the current summer in South America and after two years of pandemic, governments are reluctant to impose new lockdown measures.
Still, forecasting the impact of the Omikron surge is difficult: Goldman Sachs, for example, expects new infections to weigh on economies in the near term, as voluntary and mandatory lockdowns on services and mobility are likely to be reintroduced. “However, the low risk of hospitalizations and deaths and the declining willingness of policymakers to enforce stringent measures, as well as further progress on vaccination, should limit the impact on economic activity.”
For Oxford Economics, Latin America remains the world’s most at-risk region – even though many countries have far more people vaccinated than, say, Europe: people in Chile (90%), Argentina (85%), Uruguay and Ecuador (both %80), and Brazil (78%) have received at least one vaccination. Still, the population is at risk because of weak health infrastructure. Record numbers of infections also lead to severe courses of disease. This is now particularly noticeable in the remote regions of South America, where vaccination has not yet been carried out at all.
Nevertheless, some economists see high inflation as a greater threat to growth in Latin America than the new wave of covid infections. For example, inflation rates in Brazil (10%) and Mexico (7.4%) are at their highest levels in twenty years. The price increases for food and energy are the decisive reasons.
Central banks will have to raise interest rates far above average to stop further demonetization. And yet it will be uncertain whether the monetary measures will take effect quickly. This is because inflation in these countries is increasingly being imported.
COVID-19 in Latin America
Development of case numbers in the region
Currently reported cases in the countries
COVID-19 vaccine doses administered
Share of people vaccinated by country