Chairman Mao measured the success of Communist China’s Great Leap Forward by focusing exclusively on backyard steel furnace production, and by that metric deemed 1958 to have been a great success. However, subjugating the entire country to that narrow metric of economic progress meant everything that was not increasing steel production was denigrated, which caused the most devastating famine in human history in 1960 and 1961. Likewise today, countries which eschew all other objectives to focus excessive resources on managing the coronavirus case load at the expense of all other issues are destined for a similar shock when the full economic and social realities of a the virus-curbing policies become known.

The true extent of the impact of Covid-19 on the Latin American people may not be fully known for years. Broad quarantines covering schools and non-essential workers, and the associated economic shutdowns have been enforced to a greater or lesser extend in every country in the region. So too have stimulus programs with varying degrees of ambition and success. The only thing that seems certain right now is that, from both a health and economic point of view, only the tip of the iceberg is visible.

On the face of it, Latin American countries are suffering a far lower caseload and death toll than the world’s wealthier nations. It is true that these official numbers have their critics. Brazilian newspaper Estadao reports “excess deaths” of 2,239 in March due to “respiratory issues and pneumonia”, deaths not included in the official Covid-19 death toll. The region surrounding Guayaquil in Ecuador has recorded “excess deaths” of 5,700 in the first two weeks of April compared to the typical number for previous year, while the official Covid-19 death toll for the same period is just 295. However, the doomsday scenario of a widespread collapse of the health care systems across Latin America predicted by many experts has not come to pass.

Latin American’s young population is in a fundamentally better position to handle the health impact of the pandemic than richer countries with older populations. Meanwhile, Latin American countries are in a far worse position to bear the cost of the crippling economic shutdowns the West has copied from the Chinese response and that is now broadly considered to be the only appropriate response to the virus.

Given the novel coronavirus has no effective antiviral or vaccination, and that it is most deadly to the elderly and those with certain pre-existing health conditions, until a medical solution is developed a young and healthy population is the best defence against a high death toll. About half of all coronavirus victims have been at least 75 years old. The youth and vitality of Latin America’s population means that the death toll here should be a faction of that seen in “old Europe”. The proportion of the population in Latin American over 75 is only one quarter that of Italy.

A further consideration is that care homes for senior citizens run counter to the Latino culture where the vast majority of the older generation live at home with their family. Across Europe, residents of such homes appear to have accounted for an average of 50% of COVID19 deaths.

Then there is effectiveness of a quarantine. There are serious limitations to quarantines in countries with a large numbers of people living in informal housing. Social distancing is nothing more than wishful thinking in such conditions. Can a lockdown be effective if you don’t have a front door to close? The balance between the economic pain that needs to be born and effectiveness with which the virus can be slowed is a vastly different to countries where a high percentage of people can work online in a single family residence and stimulus cash be parachuted into individuals bank accounts overnight.

Economic stimulus costs poor countries more than it costs rich countries

In Latin American many live life from one week to the next, bank accounts to receive what government assistance is available are uncommon among the regions poorest. Any break in weekly income is felt immediately by the working poor. Hence the ability of the people to withstand severe economic shocks is radically diminished.

While the US can provide its population with fiscal and monetary stimulus measures on a scale commensurate with the projected drop in GDP, its role as the issuer of the world’s reserve currency mean that the net cost of these measures are far less than similar action taken by a developing country. The global flight to quality in the world’s capital markets mean that the US can employ the currency debasing policies of both lowering interest rates and running the printing presses. It can use wide ranging bond purchasing programs and provide helicopter money to its citizens. And yet, the value of its currency is increasing relative to emerging market currencies. Similar monetary or fiscal stimulus in the Latin America means borrowing more expensive US dollars at higher interest rates. It turns out there is such a thing as a free lunch – just not for the people who need it.

Meanwhile, with the global economic shutdown mean these emerging market countries cannot take advantage of their cheaper currencies to bolster exports. Latin American commodities, from oil to copper, are suffering severe demand shocks. According to data compiled by International Institute of Finance, foreign capital has fled emerging markets at a scale five time greater than was seen at similar stage in the 2008 financial crisis, with Brazil witnessing $13 billionn in outflows and $7.5 billion leaving Mexico. On April 22, Argentina did not make scheduled interest payments totalling $500m due on three foreign bonds triggering yet another slide towards default.

With these huge capital outflows affecting the region’s largest corporations, at the bottom of the pyramid people have been squeezed by an almost complete cessation of remittances from the US. These remittances represent a considerable portion of the GDP of some of the region’s poorest countries, particularly in Central America. They come from family members working in the US, frequently on the wrong side of immigration law, many of whom work in sectors hardest hits by the economic shutdown in the US, such as construction or hospitality. And their legal status mean that they fall outside any governmental support.

Cold Calculation

The notion that you cannot put a price on human life has been used during this crisis as moral kryptonite to stifle any public debate to the contrary. While it is perfectly valid when discussing how many points the S&P500 should be allowed to fall before economies are re-opened, in Latin America it is not a question of what degree of financial pain is appropriate to save what number of lives. At this end of this spectrum it is a question of hunger versus disease. And hunger kills 100 per cent of the people 100 per cent of the time. These important differences in the Covid-19 response calculus compared to the options facing more developed nations need to be carefully considered.

LatAm’s Covid-19 Nightmare Scenario

The path to a post-corona world is unclear for Latin America. Considering the leadtime for the development, testing and distribution of any vaccine or antiviral drugs, Latinos are also considering the additional leadtime required for such drugs to be available to them in the numbers necessary to enable them to return to work. Given the difficulties in acquiring simple items like PPE, its hard to imagine that poorer countries, and the poorer people inside those countries, will not be well down the list when any such drugs are rolled out.

And in the meantime they must hope that their nation’s financial recourses are not fully exhausted to a point where widespread hunger steals their own body’s ability to effectively fight the virus.

People were right to be extremely wary of the threat presented by the novel coronavirus when it first started spreading from China. The virus could have mutated, it could have had a far higher mortality rate for a much broader age cohort. But neither of these things has turned out to be true. Does it really make sense for developing countries to spend the next ten or twenty years of economic resources to fight what is undoubtedly an awful virus but ultimately just the latest challenge in a long list of health and economic priorities that Latin America is facing day to day? Especially when they could focus a fraction of these resources providing even better protection to the most vulnerable and letting those at lesser risk keep working.

Paul O’Driscoll began his career in Taiwan managing production outsourcing from Asia. He has lived in Latin American since 2009. Following a period working in NGOs in El Salvador and Haiti, he has held executive roles in Avianca and Viva Air. He currently works as a business consultant.