I’m holding an online Q&A today to talk about coronavirus and the impacts on Latin American politics and economics. While I’ll do my best to answer questions here in short form, I’m also doing this because knowing more about your questions will help shape the newsletter in the weeks to come.
I’m neither a doctor nor a lawyer, so nothing in my answers should be considered medical or legal advice. Like many readers, I’m also at home with two kids under 10 while doing this Q&A, so my answering of questions will be spread out over today and perhaps the rest of the week as I have time. I have no idea how many questions I’ll receive, but if this is popular, I may try it again in future weeks.
I have a lot of knowledgeable readers out there too who should feel free to contribute their expertise, thoughts, analysis and predictions.
Among the questions on my mind that I’m thinking about writing on in the coming two weeks:
What is the current base scenario for various Latin American countries?
How does this virus hit countries that are already in crisis (such as Venezuela, Haiti) and does that become a regional issue?
How does the region handle the economic slowdown?
What does Latin America look like in March 2021 and what is different due to coronavirus?
As governments proceed to devise and implement up their anti-Coronavirus policies, what are the issues most dividing LA nations domestically and across the region, and where is there a general consensus? Also, to what extent has there been collaboration or at least, good communication between countries of the region, and with the US? Are LA countries looking to the for help?
My response:
In the past few days, the only thing dividing the region has been how quickly to implement suppression policies such as cancelling schools, shutting down public gatherings, and implementing curfews. In general, politicians have been trying to one-up each other, showing that they are willing to act swiftly and their opponents are moving too slowly. That’s a good place to be at the moment politically. What we don’t know is how domestic populations will react.
Nearly every country in Latin America is used to the occasional disruption caused by natural disaster or civil unrest. Having businesses or schools closed for a few days is disruptive but not overly unusual. As this stretches beyond one week and hits people’s income, I think the population will begin to question the politicians who called for more restrictive measures. Images out of Italy (or the US) may keep people in favor of restrictions for a few weeks, but this is going to wear on populations. I worry that bold politicians may be punished in some places.
The bad news for politicians is that there is no good answer politically. Move too lightly and people will die as health systems collapse. Move too harshly and people will question if it was too damaging to the economy. An effective response looks like an unnecessary response.
In terms of communication and collaboration among the countries in the region, that is one thing that I think is lacking so far. I’d like to see a more unified response. “Close the borders” has become a default reaction. It may make sense for a short time to suppress how long it takes for the virus to take hold. Once the virus begins spreading inside of each country, they should reopen most borders and move to a more coordinated mitigation response. At that point, they don’t need to worry about new cases entering as much as they need to work together to build social distancing practices and keep their healthcare systems operating.
I hadn't seen this report. Thanks for passing along and I'll include in my Thursday newsletter links. Along these lines, one thing to consider is public trust in governments. Some governments have earned trust to engage in more repressive measures on an emergency basis (like mandatory quarantines) while other governments are going to be seen as illegitimately acting for political ends. That could impact whether populations listen to leaders and how they respond when security forces are used to enforce significant efforts.
Hi Boz! Thanks for this. My questions are Mexico focused. I read that COVID 19 is having an effect on Unión de Tepito credibility /finances - as a key part of their income comes from being involved in the supply chain of counterfeit Chinese products sold in Mexico City's historical center. What does it mean for the criminal landscape of the city? Similarly, CJNG/Sinaloa's fentanyl production has the potential to be impacted. Is this happening? what can it trigger? Thanks again and looking forward to your thoughts
I hadn’t heard about this hitting Union de Tepito’s finances, but the logic makes some sense. What I would worry about is that hitting criminal finances will push the group towards other criminal activities that may be more violent. Local gangs in Mexico City make a good portion of their income from extortion. So if counterfeit goods are down and it does have a real impact on their financial situation, they’re going to try to make up for it by increasing extortion and other forms of robbery that are violent.
The fentanyl supply chain is definitely taking a hit as Chinese exports around the world are diminished. However, The CJNG and CDS are diversified enough and as far as I’m aware, fentanyl is not the biggest contributor. Additionally, fentanyl is a small batch product. It’s plausible they have plenty of precursor chemicals or actual drugs stored up that it won’t matter for weeks or months to come. I don't think it's a key issue in the short term.
These group's most profitable drug continues to be cocaine, whose disruption has been less impacted so far, though that may be something to watch in the coming month as more borders and flights are shut down in Latin America. If cocaine profits go away, then I think it would be a serious financial disruption to these groups. At that point, more violence is definitely possible. I don’t think we’re near that point yet, but if this remains a crisis for months to come, it’s a potential issue to watch.
One other consideration for the months ahead: Pre-coronavirus, most fentanyl went direct from China to the US or Canada, with only a minority percentage passing through Mexico. It's possible those trafficking routes change when they reopen for business in the coming months. The US and Canada, to the extent they will focus on the issue, may use this disruption as an opportunity to crack down on direct fentanyl trafficking from China. Mexican criminal groups will look to fill that gap if it occurs.
Working in the humanitarian sector with Venezuelan migrants and refugees in Colombia and with work in Venezuela as well, you can see a near total shutdown of humanitarian operations due to movement and meeting restrictions. Processes for food distribution are now at risk and key humanitarian personnel cannot move to areas where they are needed to implement aid. At the same time, the draconian measures implemented in both Colombia and Venezuela are hitting much harder than they might say in Europe. I can't say for certain what the end reaction will be but while people are accepting the measures currently, people with few savings and with needs will be unable to sit and wait during a lockdown are almost certainly going to be unable to cope with several weeks or even worse, months, of shutdown and income loss. I'd guess that there will be marches and protests soon as people working in the service sector with low income simply run out of food and see no options. There will certainly not be some UBI or anything similar to come to their rescue.
Hi Boz, I'm working on some "second order" security impacts of the virus in the region. Do you have thoughts on some of the public safety/criminal fallout from this? Thinking across the spectrum from criminal networks hoarding and selling supplies on the black market, looting, fuel theft in Mexico, etc. as governments are more focused on containment measures right now. Also curious after the prison riot in Sao Paulo if this could be an increasing trend as inmates become concerned about their risks while incarcerated.
The fallout for prisons is huge and going to grow. I spoke with someone on Sunday who said that we're likely to see major spread of the virus in prisons in spite of restrictions against visits. I think more riots and breakouts are likely.
I expect hoarding and black market supply selling by organized crime, but haven't seen evidence of it happening yet. Will keep monitoring that.
On the positive side, I think street crime will drop in some countries in the coming weeks due to curfews and fewer people out on the streets and fewer bars being open. I'm betting homicide statistics will drop in some countries.
Short answer: Sort of but probably not. I would recommend doubting rumors of anyone claiming a miracle cure has been found in any country.
Long answer: The good news is that the world's scientists have a lot of promising ideas as to how to fight this virus. COVID-19 is new, but it's from a family of coronaviruses that have been studied for decades including SARS and MERS earlier this century. Scientists have COVID-19's gene sequence mapped and understand how it's structured. Because of that, they have lots of ideas as to how to build therapeutics and vaccines that should be effective. Getting a working vaccine is almost certain over the next 18 months.
However, it's largely in theory right now. Tests for both therapeutics and vaccines are just beginning amid the outbreak. So when Cuba or China or a random US drug company says, "We have a cure." it's plausible that they have something that may work, but there are months of tests ahead to know if it is safe and effective, what the side effects are, and how it compares to other potential cures.
The Economist had a good article last week on the science of this:
There are already trials of vaccines and therapeutics underway in a number of countries and my hope is that they expand those sooner rather than later.
Boz, another question when you have a moment - given what we know about the high number of "unofficial" border crossings in so many countries in LATAM (thinking CENTAM, but this applies to Colombia, etc.) how effective will the closures of official borders actually be with regard to containment?
In the initial stage of trying to suppress the virus and prevent new cases from entering, closing borders is likely to buy a few weeks time. That's true even with various unofficial crossings remaining open. No country should believe they can shut themselves off completely and keep zero cases for the next 18 months. This is about buying time and using that time to prepare, not creating a 100% effective bioshield.
Once a country has hundreds or thousands of domestic cases spreading internally, they need to shift to testing and mitigation. Take the US. With over 6,000 cases confirmed (and estimates of tens of thousands of cases unconfirmed), having a few new cases come across the Mexican or Canadian border isn't going to make much of a difference at this point.
The Colombia-Venezuela border has other considerations. Millions fled Venezuela before coronavirus. As Venezuela's health system collapses in the coming months, sick people will flee to Colombia and strain the system, which will be under plenty of stress due to the local spread. I can imagine a new migration wave out of Central America due to similar circumstances. What to do about that humanitarian dilemma is a heartbreaking challenge countries will need to consider carefully.
Thanks for doing this. I’m curious how you think the spread of COVID-19 will play out in countries with crises of legitimacy right now (Venezuela, Bolivia, etc.) How do you anticipate these crises of legitimacy playing out as citizens need to increasingly look to their governments for support? Will groups, both governments and opposition movements, politicize this crisis to fit their own needs? Gracias.
That's a great question. There are two separate but related issues to think about: Legitimacy and Trust.
In Venezuela, Maduro is using this crisis to reestablish his position as the legitimate president. While people may be forced to recognize his de facto control over certain things, they are unlikely to think he is the legitimate president nor are they likely to trust him. Guaido is also using this moment to try to project leadership, but his lack of control over institutions will make some doubt him as well.
I'm worried about Bolivia because there is a chance they will need to postpone elections. Añez already has questionable legitimacy and trust. There are concerns about her among both MAS and MAS opponents like Mesa on how she governs and the fact she's running for president. If she extends her time in power as interim president, it raises some very serious issues.
More on this as I think about it more. I hope to write more about Venezuela in the coming week.
Argentina is in the middle of debt restructuring negotiations and originally President Fernandez gave a deadline for the end of March — No one believed that was a hard deadline in the first place, but what is the outlook for the debt restructuring now given the imminent global recession and public health crisis? How much worse can things get before they get better?
So, this is definitely something I hope to research and write about soon.
Debt negotiations in the time of coronavirus are going to be very different. Fernandez and Guzman aren't going to be able to meet in back rooms with IMF officials and bondholders when nobody is traveling. So I think you're correct that the discussions will be delayed.
There may be some willingness by the IMF and other international lenders to be more flexible. One big question is whether private banks and bondholders will be flexible given how much international conditions have deteriorated.
There may be some clauses in the debt regarding crazy international crises caused by pandemics that I'm unaware of and need to learn more about.
At the moment, best practice is over-react now in terms of suppressing the virus, then assess the correct mitigation strategies moving forward. I don't think most of Latin America can afford to maintain suppression mode for months, which is going to lead to hard choices as countries try to keep their economies open.
I spent a lot of time reading and considering this report this morning on mitigation and suppression options.
I received a question by email from Peter:
As governments proceed to devise and implement up their anti-Coronavirus policies, what are the issues most dividing LA nations domestically and across the region, and where is there a general consensus? Also, to what extent has there been collaboration or at least, good communication between countries of the region, and with the US? Are LA countries looking to the for help?
My response:
In the past few days, the only thing dividing the region has been how quickly to implement suppression policies such as cancelling schools, shutting down public gatherings, and implementing curfews. In general, politicians have been trying to one-up each other, showing that they are willing to act swiftly and their opponents are moving too slowly. That’s a good place to be at the moment politically. What we don’t know is how domestic populations will react.
Nearly every country in Latin America is used to the occasional disruption caused by natural disaster or civil unrest. Having businesses or schools closed for a few days is disruptive but not overly unusual. As this stretches beyond one week and hits people’s income, I think the population will begin to question the politicians who called for more restrictive measures. Images out of Italy (or the US) may keep people in favor of restrictions for a few weeks, but this is going to wear on populations. I worry that bold politicians may be punished in some places.
The bad news for politicians is that there is no good answer politically. Move too lightly and people will die as health systems collapse. Move too harshly and people will question if it was too damaging to the economy. An effective response looks like an unnecessary response.
In terms of communication and collaboration among the countries in the region, that is one thing that I think is lacking so far. I’d like to see a more unified response. “Close the borders” has become a default reaction. It may make sense for a short time to suppress how long it takes for the virus to take hold. Once the virus begins spreading inside of each country, they should reopen most borders and move to a more coordinated mitigation response. At that point, they don’t need to worry about new cases entering as much as they need to work together to build social distancing practices and keep their healthcare systems operating.
Have you seen this from ICNL? I think the examination of the exercise of emergency powers and how that affects governance in specific countries would be useful. https://www.icnl.org/post/analysis/coronavirus-and-civic-space
I hadn't seen this report. Thanks for passing along and I'll include in my Thursday newsletter links. Along these lines, one thing to consider is public trust in governments. Some governments have earned trust to engage in more repressive measures on an emergency basis (like mandatory quarantines) while other governments are going to be seen as illegitimately acting for political ends. That could impact whether populations listen to leaders and how they respond when security forces are used to enforce significant efforts.
Hi Boz! Thanks for this. My questions are Mexico focused. I read that COVID 19 is having an effect on Unión de Tepito credibility /finances - as a key part of their income comes from being involved in the supply chain of counterfeit Chinese products sold in Mexico City's historical center. What does it mean for the criminal landscape of the city? Similarly, CJNG/Sinaloa's fentanyl production has the potential to be impacted. Is this happening? what can it trigger? Thanks again and looking forward to your thoughts
As an update, Vice published this article this afternoon suggesting the supply chain hit on fentanyl and meth is causing shifts in US supplies. https://www.vice.com/en_us/article/wxek4m/coronavirus-is-leading-to-shortages-of-fentanyl-and-meth
Those are interesting questions.
I hadn’t heard about this hitting Union de Tepito’s finances, but the logic makes some sense. What I would worry about is that hitting criminal finances will push the group towards other criminal activities that may be more violent. Local gangs in Mexico City make a good portion of their income from extortion. So if counterfeit goods are down and it does have a real impact on their financial situation, they’re going to try to make up for it by increasing extortion and other forms of robbery that are violent.
The fentanyl supply chain is definitely taking a hit as Chinese exports around the world are diminished. However, The CJNG and CDS are diversified enough and as far as I’m aware, fentanyl is not the biggest contributor. Additionally, fentanyl is a small batch product. It’s plausible they have plenty of precursor chemicals or actual drugs stored up that it won’t matter for weeks or months to come. I don't think it's a key issue in the short term.
These group's most profitable drug continues to be cocaine, whose disruption has been less impacted so far, though that may be something to watch in the coming month as more borders and flights are shut down in Latin America. If cocaine profits go away, then I think it would be a serious financial disruption to these groups. At that point, more violence is definitely possible. I don’t think we’re near that point yet, but if this remains a crisis for months to come, it’s a potential issue to watch.
One other consideration for the months ahead: Pre-coronavirus, most fentanyl went direct from China to the US or Canada, with only a minority percentage passing through Mexico. It's possible those trafficking routes change when they reopen for business in the coming months. The US and Canada, to the extent they will focus on the issue, may use this disruption as an opportunity to crack down on direct fentanyl trafficking from China. Mexican criminal groups will look to fill that gap if it occurs.
Working in the humanitarian sector with Venezuelan migrants and refugees in Colombia and with work in Venezuela as well, you can see a near total shutdown of humanitarian operations due to movement and meeting restrictions. Processes for food distribution are now at risk and key humanitarian personnel cannot move to areas where they are needed to implement aid. At the same time, the draconian measures implemented in both Colombia and Venezuela are hitting much harder than they might say in Europe. I can't say for certain what the end reaction will be but while people are accepting the measures currently, people with few savings and with needs will be unable to sit and wait during a lockdown are almost certainly going to be unable to cope with several weeks or even worse, months, of shutdown and income loss. I'd guess that there will be marches and protests soon as people working in the service sector with low income simply run out of food and see no options. There will certainly not be some UBI or anything similar to come to their rescue.
Thanks for your comment. Stay safe and healthy.
Hi Boz, I'm working on some "second order" security impacts of the virus in the region. Do you have thoughts on some of the public safety/criminal fallout from this? Thinking across the spectrum from criminal networks hoarding and selling supplies on the black market, looting, fuel theft in Mexico, etc. as governments are more focused on containment measures right now. Also curious after the prison riot in Sao Paulo if this could be an increasing trend as inmates become concerned about their risks while incarcerated.
Short reply now:
The fallout for prisons is huge and going to grow. I spoke with someone on Sunday who said that we're likely to see major spread of the virus in prisons in spite of restrictions against visits. I think more riots and breakouts are likely.
I expect hoarding and black market supply selling by organized crime, but haven't seen evidence of it happening yet. Will keep monitoring that.
On the positive side, I think street crime will drop in some countries in the coming weeks due to curfews and fewer people out on the streets and fewer bars being open. I'm betting homicide statistics will drop in some countries.
More later.
Thanks, Boz.
Hi! I have heard that Cuba has a medicine that works well against Corona, and that they will be sending it to China. Any truth to this?
Short answer: Sort of but probably not. I would recommend doubting rumors of anyone claiming a miracle cure has been found in any country.
Long answer: The good news is that the world's scientists have a lot of promising ideas as to how to fight this virus. COVID-19 is new, but it's from a family of coronaviruses that have been studied for decades including SARS and MERS earlier this century. Scientists have COVID-19's gene sequence mapped and understand how it's structured. Because of that, they have lots of ideas as to how to build therapeutics and vaccines that should be effective. Getting a working vaccine is almost certain over the next 18 months.
However, it's largely in theory right now. Tests for both therapeutics and vaccines are just beginning amid the outbreak. So when Cuba or China or a random US drug company says, "We have a cure." it's plausible that they have something that may work, but there are months of tests ahead to know if it is safe and effective, what the side effects are, and how it compares to other potential cures.
The Economist had a good article last week on the science of this:
https://www.economist.com/briefing/2020/03/12/understanding-sars-cov-2-and-the-drugs-that-might-lessen-its-power
There are already trials of vaccines and therapeutics underway in a number of countries and my hope is that they expand those sooner rather than later.
Boz, another question when you have a moment - given what we know about the high number of "unofficial" border crossings in so many countries in LATAM (thinking CENTAM, but this applies to Colombia, etc.) how effective will the closures of official borders actually be with regard to containment?
In the initial stage of trying to suppress the virus and prevent new cases from entering, closing borders is likely to buy a few weeks time. That's true even with various unofficial crossings remaining open. No country should believe they can shut themselves off completely and keep zero cases for the next 18 months. This is about buying time and using that time to prepare, not creating a 100% effective bioshield.
Once a country has hundreds or thousands of domestic cases spreading internally, they need to shift to testing and mitigation. Take the US. With over 6,000 cases confirmed (and estimates of tens of thousands of cases unconfirmed), having a few new cases come across the Mexican or Canadian border isn't going to make much of a difference at this point.
The Colombia-Venezuela border has other considerations. Millions fled Venezuela before coronavirus. As Venezuela's health system collapses in the coming months, sick people will flee to Colombia and strain the system, which will be under plenty of stress due to the local spread. I can imagine a new migration wave out of Central America due to similar circumstances. What to do about that humanitarian dilemma is a heartbreaking challenge countries will need to consider carefully.
Hey Boz —
Thanks for doing this. I’m curious how you think the spread of COVID-19 will play out in countries with crises of legitimacy right now (Venezuela, Bolivia, etc.) How do you anticipate these crises of legitimacy playing out as citizens need to increasingly look to their governments for support? Will groups, both governments and opposition movements, politicize this crisis to fit their own needs? Gracias.
That's a great question. There are two separate but related issues to think about: Legitimacy and Trust.
In Venezuela, Maduro is using this crisis to reestablish his position as the legitimate president. While people may be forced to recognize his de facto control over certain things, they are unlikely to think he is the legitimate president nor are they likely to trust him. Guaido is also using this moment to try to project leadership, but his lack of control over institutions will make some doubt him as well.
I'm worried about Bolivia because there is a chance they will need to postpone elections. Añez already has questionable legitimacy and trust. There are concerns about her among both MAS and MAS opponents like Mesa on how she governs and the fact she's running for president. If she extends her time in power as interim president, it raises some very serious issues.
More on this as I think about it more. I hope to write more about Venezuela in the coming week.
Argentina is in the middle of debt restructuring negotiations and originally President Fernandez gave a deadline for the end of March — No one believed that was a hard deadline in the first place, but what is the outlook for the debt restructuring now given the imminent global recession and public health crisis? How much worse can things get before they get better?
So, this is definitely something I hope to research and write about soon.
Debt negotiations in the time of coronavirus are going to be very different. Fernandez and Guzman aren't going to be able to meet in back rooms with IMF officials and bondholders when nobody is traveling. So I think you're correct that the discussions will be delayed.
There may be some willingness by the IMF and other international lenders to be more flexible. One big question is whether private banks and bondholders will be flexible given how much international conditions have deteriorated.
There may be some clauses in the debt regarding crazy international crises caused by pandemics that I'm unaware of and need to learn more about.
Sounds interesting. I liked your comparison. More details comparing best and worst practices would be fine. I'm into it myself. Cheers.
At the moment, best practice is over-react now in terms of suppressing the virus, then assess the correct mitigation strategies moving forward. I don't think most of Latin America can afford to maintain suppression mode for months, which is going to lead to hard choices as countries try to keep their economies open.
I spent a lot of time reading and considering this report this morning on mitigation and suppression options.
https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf
While the report just does stats for the US and UK, its messages are applicable to Latin America.