Latin America Was Already Steeped in Economic Problems. Now Come the External & Internal Shocks of COVID-19

Not even Brazil and Mexico have the fiscal and monetary leeway to offset those shocks.

By Nick Corbishley, for WOLF STREET:

Covid-19 is beginning to gain a foothold in Latin America. Even in some of the region’s tropical areas, the case numbers are rising at a startling rate. Ecuador, which appears to have caught the bug a month ago as a result of its close connections with Spain, now has over 1,300 cases — more than any other country in the region except for Brazil, which has over 12 times Ecuador’s population.

If the virus spreads across Latin America with the same virulence as as it has in Europe, the U.S. and large parts of Asia, the results could be disastrous. The region’s cash-strapped governments simply cannot afford to provide the sort of financial support programs being rolled out in more advanced economies. Even if they could, the measures would not apply to the untold millions of workers eking out a living in the informal economy, most of whom could not afford to miss a day or two of work.

Brazil’s administrative capital Brasilia, which went into lockdown a few days ago, is a case in point. Most of the city’s middle- and upper-class residents, including thousands of politicians and civil servants, are now safely ensconced at home. For the moment, they’re being paid, either to work remotely or just not to go to work. Like many places in Europe, the U.S. and East Asia, the streets in the downtown area are more or less deserted.

But once you venture out into the city’s poorer suburbs, the reality changes. Thelma, a friend who lives in Brasilia, just visited nearby Valparaíso de Goias, which is roughly an hour’s drive from the capital. “It was just like any other day in the city,” she said. “The streets were teeming with people. The buses were rammed, as were the bars, restaurants and shops. These people can’t afford to take a day off, let alone two or three weeks.”

The same is true of countless towns and cities across Latin America. Locking down entire cities or countries and paying millions of non-essential workers not to work while healthcare workers battle to contain the virus is a luxury only afforded to countries with first-world economies, huge public debt capacities, relatively stable currencies and big central banks.

Even before Covid made its first official appearance in Latin America, just over a month ago, big cracks were already showing in the region’s economy. Both Chile and Colombia had been rocked by massive social protests over economic inequality. Venezuela is in the midst of a huge humanitarian crisis, while Argentina is waiting for yet another restructuring of its unpayable debt mountain. The largest economy, Brazil, has barely recovered from its longest recession in history (2014-2017). Mexico, the second largest economy, experienced three quarters in a row of declining annual GDP.

In the last two months, Brazil has suffered $12 billion dollars of capital outflows, mostly the result of foreign investors offloading shares on the country’s benchmark index, reports the Institute of International Finance (IIF). Mexico has an other problem on its hands: the sliding value of its peso against the dollar. In the last couple of days, the currency has rallied somewhat as the dollar has sold off slightly but it is still trading just above historic lows.

The Chilean peso is more or less in the same boat, having hit unprecedented lows to the dollar a week ago before firming slightly over the last few days. Chile’s export-heavy economy is particularly dependent on China, which buys (or at least used to buy) one-third of Chile’s exports, accounting for 9% of Chile’s GDP. The recent Covid-triggered slowdown of economic activity in China means not just lower commodity prices but also lower export volumes for Chile.

Emerging markets as a whole, and particularly Latin American countries, often bear the brunt of the fallout when global risk sentiment shifts, prompting a flight of investors to low-risk assets such as such as U.S. Treasuries and gold. If sustained, this capital flight can lead to a reduction in the availability of credit in the region.

Servicing existing debt denominated in a foreign currency can also be a problem. While sovereign debt is still fairly low in most emerging economies, especially compared to most advanced economies, corporate debt isn’t, much of it in foreign currencies (mainly euros, dollars and yen) that will be much harder to pay back if their local currency slides, as is happening in multiple countries.

Another big problem Latin America faces is collapsing price of oil, for which it is not ideally positioned. The current price of WTI crude is around $22 at the moment, which is already well below the average cost of oil production in Brazil’s pre-salt ($40) and unconventional developments in Vaca Muerta in Argentina.

Mexico’s heavily indebted state-owned oil company, Pemex, is the most vulnerable of Latin America’s national oil companies, according to U.S. rating agency Fitch which downgraded the company to junk last year. The government already bailed out Pemex last year, and it may need to bail out the company once again, just at a time when the broader economy is stagnating.

Each US$10 decline in the price translates into a loss of fiscal revenues of almost 1% of GDP in Ecuador and Venezuela. Brazil, Colombia, and Mexico lose around half of that. Even before the recent collapse in oil prices, there was already a sizeable gulf between the oil price used by certain countries, including Mexico and Colombia, in their fiscal accounts and the actual market price.

On their own, each of these economic headwinds buffeting Latin America has the potential to cause serious problems for many of the region’s economies. Combined, they could wreak havoc across the entire region. And none of Latin America’s economies, not even Brazil and Mexico, have the fiscal firepower or monetary leeway to offset the external and internal shocks that Covid-19 may be unleashing. By Nick Corbishley, for WOLF STREET.

The flight into US dollars! Dollar-denominated debts of Mexican companies weigh heavily. Read…  New Currency Crisis Dawns: Mexican Peso Plunges to Record Low Against the Dollar

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  98 comments for “Latin America Was Already Steeped in Economic Problems. Now Come the External & Internal Shocks of COVID-19

  1. Realist says:

    Seems like Latin America is facing nasty times indeed. And Spain is going to get whacked yet again because of Spanish exposure to Latin American markets. This in turn will have effects in Europe.

    • David L. says:

      To give a specific example, a lot of Ecuador’s revenue comes from a 12% VAT tax, but most businesses are now closed and nobody is buying much of anything. Add that to the sharp decline in oil prices (Ecuador’s chief export) and you can get a good idea of what they’re up against.

  2. Iamafan says:

    So does everybody just DEFAULT on their loans?

    • Unamused says:

      They won’t just default on their loans, Iamafan. They’ll be offered additional loans to tide them over and dig their holes that much deeper. In the meantime corporate predators will be brought in to ‘help them’ work through their malaise, run their austerity programs, impoverish the population, and profit from them to the extent possible.

      It works the same in any country. You probably live in one of them.

      What do think of Iceland’s repudiation of the debts loan sharks ran up for them?

      • Iamafan says:

        The volcano got mad and erupted.

        • Unamused says:

          That’s how they celebrate. You just don’t understand volcanoes. As to what they understand of Icelandic political economy, who knows?

      • WES says:


        Hey, at least they threw a few bankers into prison!

      • cb says:

        @ Unamused – “What do think of Iceland’s repudiation of the debts loan sharks ran up for them?”

        It seems very logical. I’m surprised they got away with it without being shelled by warships and subjugated. If you know of any good reads on the subject, I would appreciate knowing them.

      • Juanfo says:

        Austerity it’s what’s for dinner.

    • KFritz says:

      If you pay a visit to Naked Capitalism, sometime recently Michael Hudson flatly stated that the only alternative to a full-blown economic Depression is a Debt Jubilee, the subject of his latest book. He was talking specifically about the US economy, but it’s not much a stretch to spply the same thinking and mechanisms to the World Economy.

      • Wolf Richter says:


        Debt jubilee means “asset destruction,” because one entity’s debt is another entity’s asset. So whose assets are you going to destroy?

        You can kiss our economy — including everything in your grocery store, and your paycheck, and everything else — goodbye if you systematically destroy all assets. We have bankruptcy courts that function, and we have debt restructurings that work by negotiation. That’s how over-indebtedness needs to be dealt with. People like Hudson are just nuts to propose that kind of crap. But then he’s also flogging his book, and so it makes sense.

        • 0disseus says:

          Wolf, I’m going to have to gently push back on that reply . . .

          Debt (Corp Bnd, high-yield, Treasuries, you name it) is an asset on a financial firm’s balance sheet. However, that artificial, socio-political construct is a derivative of the fundamental economy and society.

          The economic pecking order or grass-chicken-fox schematic, if you will – What is the Fox if not a biochemical derivative of a gaggle of geese or a brood of chickens?

          As the old adage goes:
          Assets – Liabilities = Owner’s (or Stockholders’) Equity

          Or, as we think through the maths:
          Assets = Equity + Liabilities

          So a Debt Jubilee is just a socio-political restructuring or recapitalization. A Debt Jubilee may destroy assets for hedge funds and the rentier class, but actually improve the Economy’s ability to create true or real Assets (i.e., planes, trains, and automobiles)

          Anyway, keep the great articles coming while we ride out the cytokine storm! Thanks for all the ink spilled ;-)

        • Wolf Richter says:


          There are over $40 trillion in investment-grade fixed-income assets in the US. They’re held by savers, pension funds, retirees, etc. $40+ trillion with a T. Just in the US.

          And all this $40+ trillion is some other entity’s DEBT. You wipe out the $40 trillion in debt, you will also wipe out that $40 trillion in assets that people, banks, and companies have and rely on. Everything will just collapse, including every single bank. There won’t be anything left of that bank except a building that then no one can buy because there won’t be any banks to process transactions or lend money or deposit this money you might get in suitcases from a buyer. You people need to think this through.

        • cb says:


          Let’s take a closer look at, and expand the argument of Odisseus.

          Though it is true that one entity’s debt is another entity’s asset, many of those asset’s have been artificially created and supported, and in many cases are undeserved. When the Banks were bailed out, there was a transfer of undeserved wealth to favored entities, and a corresponding weakening of other entities.

          A writer known as Finster has pointed out – “there is a kind of debt that you can definitely have a healthy economy without, and more to the point, you can’t have a healthy economy with. That’s when debt is produced by central planners, especially when it’s how they issue your currency.”

          The central planners, in part, he is referring to is the FED. Their money creation has bastardized our financial system, has distorted the countries ownership structure , has picked winners and losers in our economic “competition,” has benefitted one class at the expense of another, and is antithetical to free markets.

          I put forth that the FED has corrupted the ownership structure and contributed to an indebted rentier society that is benefitting one class, in many cases undeservedly so, at the expense of another. In such a case, perhaps a look at the destruction of certains debts and corresponding assets might be equitable, and, in fact healthy.

          Incidentally, bankruptcy laws, government subsidies, housing laws, etc. have been adjusted to favor the capitaled class over the non-capitaled class. And as an aside, there is the “Citizens United” Supreme Court decision, which I will suggest allows the buying of politicians at the expense of the taxpayer and the common citizen.

        • cb says:

          To give more insight on a view of legitimate finacial asset ownership versus questionable financial asset ownership, I offer Finsters full quote:

          “On the other hand, there is a kind of debt that you can definitely have a healthy economy without, and more to the point, you can’t have a healthy economy with. That’s when debt is produced by central planners, especially when it’s how they issue your currency.
          Normal debt is when two consenting adults agree to create it, in the process of one lending to the other. The lender forgoes the use of the money while it’s lent out. But the debt produced when a central bank lends money into existence isn’t that kind. No one is forgoing the use of anything. There’s no deferral of consumption. The “lent” money is conjured out of nowhere.
          The engine of economic progress derives from forgoing consumption and using the resources to produce more. Instead of consuming part of the corn I grow, I sow it to produce another crop. If I eat the seed corn, I may be full today but go hungry tomorrow.
          The core thing here is that you have to go without something today to be better off tomorrow. If deferral of consumption is crowded out by borrowing without there being any lender going without, economic progress is frustrated, not aided. You need capital to make labor more productive and increase living standards, but it has to be real capital derived from deferred consumption. Fake capital won’t do it. Worse, it displaces the real thing and reduces living standards.”

  3. stan6565 says:

    There are some bad times ahead for Latin America.

    A couple weeks further down the curve is Africa, where there are hundreds of cases already reported in likes of Egypt, Nigeria, Algeria, South Africa, Somalia, Kenya, DR Congo. And so on.

    All countries with many millions of inhabitants and with governments of iffy record of proactive and real-time thinking, or record of meaningful population control. Or meaningful anything for that matter.

    Or population willing or able to contribute to being controlled for the joint effort of greater good for their country.

    Only a few weeks from now, we will be hearing news coming from Africa, surpassing in grimness, by order of magnitude, anything we have seen in China Italy Spain or States so far.

    • Thomas Roberts says:

      It’s important to remember the CCP Coronavirus is far more dangerous to elderly, some countries with very young populations, could be far less effected. Though they would not be able to protect their elderly “the poorer countries”. In terms of economy though, they could suffer possibly, very little.

      The main issue not widely discussed is how much the coronavirus effects the malnourished “malnourished is of course a range, you may be slightly or alot”. Nobody probably knows yet, but in countries like India where a lot of people are malnourished it could be far more dangerous, even if they have a younger population, but we don’t know yet. We have no idea yet how Africa will be affected, hopefully, the warmer weather does improve survivability. Also, though because everyone is worried about the coronavirus, there is a risk Ebola could break out “in Africa”. In the long term Ebola, if it breaks out, might be a much bigger issue for Africa.

      • char says:

        Ebola is so bad that you don’t have the idiotic “save the economy” brigade so it is much easier to stop. The idiotic “save the economy” brigade does not understand that to save the economy you have to get to a situation that people don’t die an mass. And the quickest & cheapest way is by a hard lock down

        • Thomas Roberts says:

          Ebola and the CCP Coronavirus are very different. Although, they both originate from bats.

          For Ebola, It’s not that they are unwilling to stop it, it’s that because richer countries are much more worried about coronavirus, they will probably not give as much effort to help stop it.

          There are many parts of Africa that have indigenous religions and customs, and in general are not capable of stopping it themselves, basically only rich foreigners can come in to stop it. If Ebola breaks out enough, it would be very difficult to stop, and the death toll would be very high, it kills most people who get it. It however cannot spread easily enough in richer countries and would die out, so it is only a risk for Africa and parts of Asia.

      • CRV says:

        This morning i saw a news message saying the majority of people ending up on IC has overweight. Were talking about the Netherlands. Maybe there is no real corrolation between the virus and weight and are we just in majory (a little) obese.

        • Thomas Roberts says:

          Yes, because the CCP Coronavirus links to a enzyme “Ace2” that is used by your body to lower blood pressure its speculated that being overweight makes coronavirus much more dangerous “smoking is believed to have same dangerous effect”. But, it likely varies by age, how out of shape and just how overweight you are. It might also be possible that athletes or other people who are super fit, might be at greater risk, because, maybe their body produces alot of Ace2 to keep blood pressure down, this is very speculative.

          However, being malnourished GREATLY weakens immune system.

          People who are overweight, are probably more likely to smoke “and other risky health behaviors” and smoking is more common in Europe than in America.

          So overall, hard to say.

        • Wolf Richter says:


          In the US, the majority of the people are overweight. So therefore, the majority of voters are overweight, and the majority of consumers are overweight, and the majority of car buyers are overweight, and the majority of cellphone users are overweight, and the majority of coronavirus patience are overweight.

  4. gorbachev says:

    Massive corruption doesn’t help as well.For instance

    if your a policeman and clean you will not make it,

    The people above you need a portion of what you collect to make

    a go of it. Very difficult life.

    • Unamused says:

      The people above you need a portion of what you collect to make a go of it. Very difficult life.


      When there is a lack of honor in government, the morals of the whole people are poisoned.

      – Herbert Hoover

      You can expect the entire world to fall into debt peonage in due course. Most of it is well on it’s way.

      We talk about the problems a lot on this blog. But what are your solutions?

      • VintageVNvet says:

        Una: first and foremost, Clean House, Senate Too should be the mantra of every voter and every political organization that makes any claim to be helping We the People of the entire earth.
        IOW, keep voting OUT the incumbents until we actually get politicians who are public servants and serving the best interests of the people instead of lining their own pockets while acting as puppets of the oligarchy, as you have pointed out in another thread on Wolf’s site.
        Obviously, that does not include the putative pres nominee of the democrats, so it will be interesting to see who they actually put up this time.
        After that, in USA and hopefully following elsewhere similar to the pro democracy actions following the original revolution, 4 or 5 common sense Constitutional Amendments , including term limits; equal application of all laws and rules made from those laws, especially relating to only one public medical and one pension program with all elected and appointed guv mint employees only on that one; etc.
        While I agree with you that most of us older folks actually have been gently and firmly conditioned to accept the increasing financial foolery of the last 50 years or so taking value out of our savings/money, IMO the younger folks have not been, yet, and this event is going to be shocking a lot of them into action, and I hope into political activism not violence.

        • char says:

          It is inherent in the constitutional order of the US that shared responsibility is often not working so i would argue write a better constitution.

      • cb says:

        We must curtail the banes of free markets: in part,

        Excessive concentrated wealth and power
        the FED

    • GolferDave says:

      This problem (systemic corruption) isn’t confined to Latin America

      • Briny says:

        I’ve wished that Equal Protection Under the Laws also translated as Equal Application Of the Laws; Starting with those Senators that conducted a bit of insider trading.

  5. Stephen says:

    Looks like there may soon be a hundred thousand job openings for Border Patrol agents (contractors, of course) when the southern armies of hungry and homeless start marching north. Of course, they would be better off staying where they are if the stuff goes down hard here in the US (as I think it will). First world economies certainly have more financial band width than the poorer economies, but when the doo hits the fan really hard, few people are prepared to live in a subsistence lifestyle economy (including myself).

    • Wisdom Seeker says:

      I’m going to guess that this time around, the Mexicans won’t let them pass, since they will be hauling contagion throughout Mexico…

    • stan6565 says:

      The Greeks were reported recently to be a notch more assertive, compared to the responses they were dishing out over the last few years.

      At what point do the citizens on the receiving end of invading homeless and hungry say, it is easier and cheaper to keep spraying slugs across. In order to protect our lives, that is.

      • David Calder says:

        What happens when those same citizens are themselves hungry and homeless? Where do you think the slugs will fly when that happens?

  6. Wisdom Seeker says:

    I don’t see any path through the pandemic that doesn’t involve a lot of long-term pain.

    Back of the envelope says that 50-70% of any population not doing social-distancing will be infected and 7-15% of those will die, depending on how youthful the demographics are and how well the food supply holds up. So 3-10% of overall population. On top of that, when the pandemic hits in full force, huge changes in social mood and behavior will happen regardless of any government policy. So the economic damage will be huge as well.

    Sounds like India is going with social distancing, but that comes with its own price. Meanwhile there are behind-the-red-curtain reports of major riots in China…

    • Wisdom Seeker says:

      Bolivia has joined the ranks of countries sacrificing the economy to protect public health. National lockdown, only one person per household allowed to go out, only in the morning, only one day per week, based on national ID numbers. No one on weekends…

      • char says:

        Bolivia is ruled by a junta that is not particularly popular and does not control the whole country. This is part of the reason why they want a lock down

    • Gandalf says:

      The biggest known riot happened at a bridge between Jiangxi and Hubei provinces. Travel restrictions for people from Wuhan (Hubei) were lifted recently, but Jiangxi province didn’t want them coming in and sent a line of riot police with shields to block them at the bridge. Other reports say additional police were sent in to arrest these Jianxi riot police to let the Wuhan people through

      Google this and there are videos of the clash

      Alaska also recently imposed some sort of travel ban/quarantine on travelers from the other 49 states


    • VintageVNvet says:

      ALL future predictions of numbers/percentages of contagion and deaths are speculative at this point due to:
      1. The uncertainty of information from every source so far.
      2. The entirely different approaches so far, almost as though ”programmed” so that each of the different approaches can be tested.
      3. The small size of the cohort relative to the entire population of the species under attack. (500K out of 7.xBB)
      4. The unknown mutability of the attacking virus; a post on here indicating 5 known ”clades” so far, but under what conditions did each arise, etc.

      We have a long way to go, and if, as suggested, this virus follows the pattern of the ”Kansas” variety of 1918 to 1920, a long long long way.

      • Lisa_Hooker says:

        Note: phylogeny of clades of novel coronavirus are now up to 10: A1a, A2, A2a, A3, A5, A7, B, B1, B2, B3 & B4. The number of subclades is probably over 100, and growing. Mutation is essentially inherent in virus replication using RNA.

      • Gandalf says:

        One report I read said the virus had so far picked up two mutations in its sequence a month. Just random mutations, increased reproduction and viability would be the main gene drives

        The viability of each mutant strain could favor increased activity (i.e., more rapid reproduction and release in the host, leasing to more lethality in the host) especially in populations that are tightly packed together in housing with large numbers of people and little access to healthcare or social distancing. That’s likely what made the second wave of Spanish flu more lethal in that era

        The other way it could go would to become even more infectious and less lethal. Lots more asymptomatic people carrying it around, lower but non trivial lethality, more like an endemic flu

      • Gandalf says: has the most up to date info on the various strains of SARS/Cov-2. Latest data shows 723 strains

    • Javert Chip says:

      With apologies for interrupting your dystopian seance, but where do you get mortality rates of 7-15%?

      • MC01 says:

        Italy has a mortality rate of 15% among those confirmed infected, albeit it’s being going down for a few days.

        The reason mortality is so high is very simple: this is a country for old folks, and not many 80+ year old are in good health and hence more likely to fight it through. It’s the elderly who are being decimated.
        If you look at the obituary pages in the local newspaper it’s a lithany of people aged 77, 79, 83, 85, 93… if I remember correctly the average age of Covid-19 victims in my province is 81: this is leading to all sorts of gallows humor jokes about the virus being unleashed by Social Security and inheritance seekers.

        This is leading to another problem: how are these elder folks being infected? We have been in full lockdown for three full weeks. Many towns (included mine) will bring the elderly their groceries and medicines directly at home free of charge: the volunteers doing the rounds are closely monitored and tested for Covid-19. They wear face masks at all times and change their disposable gloves after every visit. They are under strict orders not to touch people.
        I won’t even detail the lengths people go to avoid each other: the police has so little to do they are even offering their men and vehicles to help delivery groceries and medicines. It seems even the once ubiquitous drug dealers have disappeared.
        So how are people getting infected? That’s the big problem for me.

        • Francesco says:

          Untrue. The real reason is the number of reported cases is a small fraction of the real number of infections. The real one is 4 to 10 times higher. Health care in Lombardy and Emilia Romagna the hardest hit regions are at highest level. They are trying to cure everybody, recently a 100 years old woman came back home after 3 weeks in hospital. Iron woman indeed. There is no reason to believe mortality rate is higher than 1,5 to 3% if ICU is available. More, if a patient has access to oxygene at the very early stage death rate is reduced to 1%. If an ICU is not available the very sick will die. So the fork is extremely wide 1% to 10%, prevention is the key and the only possibility. The bad news is that for a new, but yet not peer-reviewed, study the R0 is 4,4 to 6,2 in an uncontrolled environment, so yes this is the ideal condition of a widespread pandemic, moderately low mortality, very long incubation, extremely high infection rate.

        • char says:

          A couple of months is not a very long incubation period, let alone a few days as with corona

        • Sit23 says:

          Could somebody, just once, for crying out loud, please use the word decimate correctly. It literally and obviously means every tenth person gets it. Nothing else.

        • Wolf Richter says:


          Nope. Time to emerge from your ignorance about the English language. What you’re citing is the meaning of the Latin verb in Roman times: a punishment for legions that weren’t brave enough. The soldiers would have to line up and every tenth soldier was killed. Today, the primary meaning of “decimate” is, as quoted from my Random House Webster’s dictionary:

          “1. to destroy a great number or proportion of: The population was decimated by a plague.”

      • Wisdom Seeker says:

        Javert – if you don’t do social distancing, hospital care is totally overwhelmed, so half of those who require hospitalization die instead.

        The largest cohort study, from China, showed that 20% of confirmed cases required hospitalization. They may have neglected to mention that 1/3 of their positive test results were asymptomatic and not counted as confirmed, but that’s fog of war for you. Still leaves 14% of total infections requiring hospitalization and that gets you to 7% mortality.

        Now you have to factor in that during the peak of the outbreak they had no means of testing every case and many died of “viral pneumonia” etc., without being accurately counted as COVID. That’s where I add in the factor of 2 bonus.

    • I really shouldn’t have to do this, Wisdom Seeker, but your numbers are outlandish and offensive to the intellect. The official death rate from the WHO report on China is 0.7%. Of ALL known infections. Ignoring all mild cases that never even got tested. Suggesting apocalyptic rates of 7-15% overall death rates is akin to screaming fire in a crowded theater. Which is illegal. I’m not threatening to turn you in to the truth police, because none exist, so people can just claim whatever they want these days. Is that the camp you dwell in?

      • char says:

        It is calling infernal when there is a medium size fire. Not really wrong. I think 0.7% would also be considered apocalyptic afterwards.

        • Sure! Exaggerating the risk of death 20 TIMES what it actually is is fine! What’s wrong with people panicking and hoarding medical supplies needed by front-line medical workers, even ventilators if they’re rich!? (actually happening) Who’d accept The Great Fleecing if we didn’t convince them we’ve got a HALF BILLION DEAD on the way? Good thing all we have to do to survive is avoid humans for half the year! I should be so lucky.

        • char says:

          This are number a human mind can’t understand so 0.5% or 10% are in my opinion the same. And 0.5% is with a function health system, which you won’t have. There is also the effect that older people know more older people so when you are 60 it will kill 10% of all the people you know. May even be more. People are right that they are panicking.

      • Wisdom Seeker says:

        @Change Machine. I stand behind my analysis IF THERE IS NO SOCIAL DISTANCING. I’m sorry if I confused anyone.

        I was trying to address the question of whether there’s a better path through the pandemic than the road we are on. Some folks were arguing we should just tough it out and go for herd immunity. Trump has been trying to get people to think about how to get through this without as much economic shutdown.

        Basically, the no-social-distancing approach is going to have a high mortality rate. So that’s not a scenario we are going to go through. We need to come up with a way to keep people safe while still being productive.

        MC01’s point about italian fatalities continuing despite longstanding social distancing is a big concern. On the other hand, China seems to be okay?

        • Francesco says:

          Italian fatalities continuing but not despite longstanding social distancing. Real reason is that distancing and full lockdown were too slow, not in the whole country, not at the same time. So there was enough time to create a large pool of infected people who moved around. Look, virus could incubate up to 14 days and the infected could remain able to spread the virus for at least other 14 days. This is a very very long time for an infectious disease like this. There is a lot of speaking about China but I think the best example of containment is Singapore followed by South Korea. Local authorities moved very fast and a very disciplined peope followed the instructions closely. Furthermore extremely aggressive action was put in place for economical support. Singapore spent 10% of the GDP and money was directly credited in the bank accounts. Hong Kong did the same. I’m very tired to listen about the superiority of the western model. It was 30 years ago. There are a lot of confirmed news about rich and famous people being able to have a test even if they have no symptoms at all, while people with fever and dyspnoea had to wait, even many doctors and nurses were not able to test. This happened in Italy and the US, did not happen in the asian countries, so it’s rather obvious that our system is broken, corrupt beyond the wildest imagination. This will have a lot of conseguences, much more deaths, much more economical destruction and social unrest, and a more difficult future. Most of the people are fine but they have to react now or the future will a bleak medieval nightmare.

        • char says:

          Part of me is in favor of herd immunity but than i remember that there is a way to save people by injecting them with blood plasma of people who have survived it. This obviously doesn’t work for everybody but it can save important people like presidents and kings. So they don’t have to undergo the consequences.

  7. Joe Lalonde says:

    Canada will be beyond decimated by this as the government has new money from the Bank of Canada and still ignore the core needs of its citizens.
    Adding new laws and regulations on top of all the old ones including the elimination of single use plastic.

    • Paulo says:

      I don’t know about that, Joe Lalonde. I cannot think of a country I would rather be in right now than Canada, especially my neck of the woods. Today, our Provincial health officer (who speaks daily with actual data to share) seemed optimistic as our rate of new infections appears to be slowing. We’ll know for sure in two weeks. We also have lots of testing going on and hospitals are being emptied as much as possible to prepare for a worst case scenario.

      The data shows we are closer to S Korea, but we are preparing for a northern Italy situation. I feel lucky to be in a country where leaders, as flawed as they are, (just like ourselves), are leaving decisions to the scientists and actually have short, medium, and long term plans; plans they are sharing with us.

      • Joe Lalonde says:

        For the size of our workforce, we had over a million Employment Insurance apply in one week.
        Government is offering more loans and the majority of small businesses will never re-open.

      • WES says:


        Agree BC seems to be doing better than Ontario where they are pretending community spread doesn’t exist.

        Yes they have set up assessment tents to divert people away from hospital emergencys, but they don’t test. No test kits. Just send you home!

        So far, my daughter and wife likely have the coronavirus. My son might of had it, but we are not sure.

        The symptoms are the weirdest flu’s I have every seen! Most flu’s hit you right been the eyes in no uncertain terms!

        I don’t think I have it, but who knows?

        We will probably never know. Same for friends.

        No tests for us, so we are not part of anybody’s statistics!

  8. Gandalf says:

    It’s beginning to look like this virus is NOT going to go away. Not for a long time

    An NPR story today interviewed some Wuhan people, including two doctors, who had gotten COVID, recovered, and were sent home with negative virus tests, only to be found positive again on re-testing, and ASYMPTOMATIC.

    The story said that China was no longer counting ASYMPTOMATIC patients who tested for positive. An official claimed these people couldn’t infect others because they were still being quarantined. Right.

    The poor countries of the world will be the laboratory for testing the concept that we should just let the virus run its course, wipe out the old and chronically ill, and just move on, an idea espoused by Texas Lieutenant Gov Dan Patrick, and to some degree by the guy in the White House

    Darwinian evolution at its finest

    • Matt says:

      According to a Mexican governor, poor people don’t get Coronavirus ha. That’s quite comforting that China isn’t reporting asymptotic positives. Assuming that’s true, that confirms my suspicion of the mortality rates being far lower than what’s being reported. I can’t wait for this sensationalism to end.

      • Gandalf says:

        Russia has only recently acknowledged the COVID pandemic. It was hiding COVID related deaths by not testing. Deaths for “pneumonia” reportedly spiked by 37% recently in one city, I think Moscow.

        COVID-19 is real. If you want to volunteer all of your elderly relatives and those with chronic diseases to be first in line for the crematorium, by all means, keep partying as much as you can and then go visit them all and sneeze on them and hug and kiss them all over.

      • Paulo says:

        Of course there is so much accurate testing going on with poor people.

        We have very good testing where I live and the testing is keeping the situation from exploding as contacts are being traced and warned. Plus, our streets are pretty much empty due to orders from the public health officer. The mortality rate depends on how entrenched the virus has become, from 1.4% to over 8%. If the health system is overwhelmed, the mortality rate rockets up. Even the low rate is over 10X the seasonal flu and around the level of the Spanish Flu of 1918.

    • char says:

      4th world countries don’t have many old and to much disease to notice and third world countries can do the same lock down procedure as China. You don’t need to import anything for that.

  9. nick kelly says:

    Any thoughts on Uruguay. I have spent time there and have friends there. Seemed like a pretty well run place but only 4 mil pop with giant screwed up neighbors.

  10. GolferDave says:

    My bet is that Mexico will get back to work shortly. This is a country where death is treated as a part of everyday life… Mortality and injury through traffic accidents (of which there are many) are almost allways uninsured.
    There is of course the annual head count of cartel violence. Health care is limited for the poor and non existent for the destitute.
    There is no incentive to test when you can’t afford the treatment. .. there is no unemployment insurance, bailouts or social safety nets to speak of. On the plus side there is little consumer debt.. and few mortgages. They are very likely to return to work in spite of any government decrees…the central govt is much weaker than what we are used to and some states act as independent entitites.

    • nick kelly says:

      ‘the central govt is much weaker than what we are used to and some states act as independent entitites.’

      Wow. Imagine

  11. Bob Hoye says:

    Good update.
    Just think of how bad the situation would be if Covid-19 had the killing rate that the ordinary flu has had.

    • David Calder says:

      COVID is ten times more lethal than the flu; 1% vs 0.1%.. It has a transmission rate of 2.2 vs 1.4 for the flu.. This is why the world is shutting down and not in some hysterical panic over nothing.

      • S says:

        No way the “transmission rate” is 2.2. The R-naught factor is more like 3.0 to 4.0 or perhaps higher. (The R-naught of measles is 12.0, which is the highest of common viruses.)

        And the death rate depends on the age of the population that is being infected.

        • David Calder says:

          From the WHO: “The reproductive number – the number of secondary infections generated from one infected individual – is understood to be between 2 and 2.5 for COVID-19 virus, higher than for influenza.”

          It was Dr. Fauci who made an honest educated guess, (because we don’t know the actual numbers on those who are infected) at 1% and not the reported 2-10% (which is probably accurate for the age groups and those who are already weak)

      • char says:

        That 0.1% is not for the average flu but the once every generation seriously bad flu season

      • Wisdom Seeker says:

        Hey David – another way to describe the lethality is to say that COVID appears to be 10-30x more lethal than seasonal flu for all age groups.

        • char says:

          Not seasonal flu, when flu changes some of its proteins and that does not happen every year.

  12. Lisa_Hooker says:

    Does anyone know the breakdown for Latin American countries in terms of oil sold in longer term contracts and the percentages sold on the spot market?

  13. Lisa_Hooker says:

    I remain secluded re-reading Albert Camus’ The Plague. As this masque of covid19 continues I’m thinking of starting Edward Gibbon’s Decline and Fall as being appropriate.

    • Briny says:

      Now’s definitely the time to crack open some texts. has made their entire library (1.2M+) openly available, much to the disgust of The Authors’ Group.

    • sierra7 says:

      Lisa Hooker:
      Am re-reading for the third time, “900 Days.The Siege of Leningrad” Harrison Salisbury……….(Pub around late 1960’s)
      Now there was “suffering” and death……….

  14. Bobby Dale says:

    Point of contention:
    The populations if Latin America and Africa are much younger than those of developed nations, hence the effect of Covid 19 should be less pronounced.

    • char says:

      True for Africa, not so true for Latin America. The 2 kids a mother happened a generation ago

  15. Javert Chip says:

    Regarding Coronavirus, it sure looks like China had one hell of a lot more political will to control the disease than Brazil.

    China’s per capita GDP is $11,311 USD (assuming you believe inflated Chineses numbers); Brazil’s per-capita GDP is $9,821UDS.

  16. Unamused says:

    Not even Brazil and Mexico have the fiscal and monetary leeway to offset those shocks.

    It would not be the first time states have failed because of a pandemic or other natural disaster. Unfortunately a number of US southern states are facing the same predicament, and for similar reasons.

    Now that you have a global pandemic, can supervolcanoes and alien invasion be far behind?

    The difference between a global catastrophic risk and an existential risk is that with the former civilization could recover, whereas with the latter it would not. The cov-19 pandemic is merely a global catastrophe because it is hardly expected to result in an unrecoverable collapse by itself, although it could become a contributing factor when stacked on top of all the other crap that’s going on.

    Climate change is likely to turn out to be an existential catastrophe because of its expected severity and persistence, but that type of risk is more difficult to study because humanity has never actually been exterminated before. Supervolcanoes and alien invasion could turn out to be either one, but that is rather up to the supervolcanoes and the aliens. Nuclear holocaust always has the potential to be an existential catastrophe, depending on just what kind of nutjob people can be gaslighted into electing.

    That said, civilizations have vanished rather frequently in human history. People tend to take a great deal for granted, if only because most people are just trying to get through the day and have more immediate concerns.

  17. S says:

    Just a technical question: Isn’t Brent Crude more applicable to a latin america oil discussion rather than WTI Crude?

    • Wolf Richter says:

      No. It’s even further away from South America (coming from the North Sea) than WTI (from Texas). But they’re both global benchmark grades. You could use local grades, such as the “Mexican Basket” which trades at less than $15 a barrel. But that’s irrelevant for Brazil and other oil producers, and it’s not a commonly quoted grade, so it’s kind of useless here.

  18. George W says:

    The evolution to a full service economy.

    Too bad these Latin America economies have not yet fully evolved into the ever sustainable service economy like the US of A. 2.2 Trillion is a drop in the hat, when we hit 30 trillion all the services will be back.

    The evolutionary cycle of the US economy will not complete, until the only service that exists is the service of debt.

  19. David Hall says:

    Brazil had 4% inflation.

    Argentina defaulted on debt holders sometimes. It had over 50% inflation.

    Venezuela liked Marx. It recently had 2500%+ inflation. Locals preferred to be paid in US dollars.

    • WES says:


      Actually after observing communism live, I have concluded they don’t need any outside help! They know how to do it better than any outsider ever could!

    • char says:

      For how long will the locals prefer dollars?

  20. Chloe says:

    Two things none of you have factored into your forecasts:

    1) The Corona belt – looks like it may create havoc in Canada this summer but save Florida, central and Latin America

    2) The U.S. consistent ranks as the LEAST healthy developed country in the world. Spain and Italy consistently rank as the MOST healthy countries.

    Think this will have an impact on the CFR? Idk but we’re about to find out.

  21. char says:

    A 6 weeks lock down for which you don’t pay rent and interest and such and get a small stipend for food would be enough to defeat C 19 and would not cost that much. Not 12% of GDP but only 1 or 2%, something the Latin American states could bare.They don’t want to implement this policies because of ideology

    • cesqy says:

      This virus will probably come in waves of reinfection unless draconian border controls are put in place. What are the economic and social consequences of that? I get the feeling that herd immunity is what slowed down new infections in China but that could change if outsiders reintroduce new mutations. Who knows (pun intended)?

      • char says:

        To few deaths for herd immunity in China. Not a percentage or so but orders.

        Countries without herd immunity wont come to countries with herd immunity and to build up herd immunity takes months so draconian border controls don’t cost that much in reality.

  22. Juanfo says:

    Active looting in Colombia.

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