Coronavirus
Deserted food carts in Mexico City's Chapultepec Park. Deserted food carts in Mexico City's Chapultepec Park.

While WHO praises virus response, financial analysts say it’s too slow

'The more time lost, the greater the consequences for both public health and the economy'

There are conflicting views on the government’s response to the coronavirus pandemic: the Mexico representative for the World Health Organization (WHO) has praised the measures implemented but some financial analysts say that the López Obrador administration is acting too slowly and that the public health and economic consequences will be severe.

Cristian Morales, who also serves as the Mexico representative for the Pan American Health Organization (PAHO), told a press conference on Wednesday that the government’s decision on Tuesday to declare that the country had entered a phase of local transmission of Covid-19 was a “very timely” one.

The stage 2 declaration triggered stricter measures to contain the spread of coronavirus, including the suspension of events attended by more than 100 people, while the government instructed Mexicans to strictly observe social distancing conventions, work from home if possible and take greater care of the elderly and other vulnerable people.

“We’re very happy. We salute the decision [the declaration of stage 2], which was taken in advance. They didn’t wait until the last minute,” Morales said.

He said that countries where there are large outbreaks of Covid-19, such as Italy, Spain, France and Germany, only announced stricter social distancing measures when they had three or four times more cases than Mexico (cases here increased from 405 to 475 on Wednesday.)

“Mexico is benefiting from the experience of these countries. … These [stricter] measures and even those that were taken before the declaration of this stage are very commendable. They [the government] are on the right path. I think that we’re a step ahead,” Morales said.

While praising the actions taken to date, the WHO/PAHO representative said that even stricter restrictions on people’s movements in the form of a curfew or total quarantine is likely to be needed at some point in the future.

“In some countries, Chile for example, … there is a curfew between 10 at night and … 5 in the morning. … In [some] European countries … they’re implementing a complete home quarantine. That corresponds to the stage that those countries are going through. It’s probable that at some time in Mexico, we’ll have to take those measures. … What we shouldn’t do is get ahead of ourselves unnecessarily,” Morales said.

In contrast, the chief economist of the bank BBVA México believes that the government needs to implement stricter measures sooner to contain the spread of Covid-19.

“The more time that is lost, the greater the consequences will be for both public health and the economy,” Carlos Serrano said.

“We’re predicting an economic contraction of 4.5% in 2020 with a strong downward bias if they continue to postpone measures to slow down the contagion,” he said.

Mexico should be “overreacting” rather than underreacting to the coronavirus crisis, Serrano added, charging that all countries that have had large outbreaks of Covid-19 “say that they should have done more sooner.”

The economist also said that unprecedented measures are needed to “limit the economic consequences of the pandemic,” asserting that support for the “most disadvantaged” should be a priority.

President López Obrador said this week that his administration would seek to support the neediest while ruling out any possibility of waiving taxes for large companies. He also announced that interest-free or low-interest loans would be provided to 1 million small businesses to help them weather the coronavirus storm but didn’t specify how much money the government would offer.

But analysts at Capital Economics, an economic research consultancy, believe that the government needs to do more to support the economy.

Describing the economic response to date as limited and slow, analysts said that the Mexican economy is headed for a 6% contraction this year.

The analysts noted that the central bank cut its benchmark interest rate by 0.5% last week but said that there has been scant government support for households and large business to help them cope with a loss of income due to the growing spread of coronavirus and the measures put in place to contain the disease.

They warned that if the government doesn’t provide sufficient financial support or is too slow in offering it, companies will collapse, unemployment will go up and defaults on loans will increase.

Similarly, the director of analysis at HR Ratings, Latin America’s first credit rating agency, said that the performance of the Mexican economy this year will depend on the government’s capacity to respond robustly to the Covid-19 health crisis.

Félix Boni added that it is not yet clear what percentage of the economy will be affected by the coronavirus outbreak in Mexico and how strongly it will recover once the virus has been brought under control.

Source: Milenio (sp), El Financiero (sp)

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