Tue Mar 30, 2021
We’ve been to Brazil and have visited contiguous countries such as Argentina and Uruguay. (I’ve written about one trip here: https://www.interdependence.org/blog/reflecting-south-america-trip/.) Such travels are not possible now. As is the case for Europe and South Africa, travel restrictions for Brazil, which President Biden extended in January, remain in effect (https://www.reuters.com/article/us-health-coronavirus-usa-travel/biden-extends-europe-brazil-travel-restrictions-adds-south-africa-idUSKBN29U26W). Exceptions are made only for humanitarian reasons, and a negative COVID-19 is required in advance of return to the US (“Covid-19 Testing Required for U.S. Entry,” https://travel.state.gov/content/travel/en/traveladvisories/ea/covid-testing-required-us-entry.html).
We are now watching a COVID disaster unfolding in South America, and not just in Brazil (“Brazil Breaches 90,000 Covid Cases in Record Day,” https://www.bloomberg.com/news/articles/2021-03-17/bolsonaro-s-rejection-soars-amid-historic-healthcare-collapse). Implications for markets and the global recovery are huge. They coincide with European COVID vaccine chaos.
Brazil is in crisis at this point. The country’s healthcare systems are showing signs of collapse, with its ICUs 80 and 90% full – and 90% full essentially means that there’s no more room because it takes several hours to ready a vacated bed for the next patient. When an oxygen tube has to be run out the window and up six floors to reach a patient struggling to breathe — or worse yet, when critical supplies are not to be had at all — the situation is dire. When almost a quarter of those who have died from COVID over the last two weeks worldwide died in a single country, the situation is dire. (“Signs of collapse across Brazil as Covid spirals out of control. Bolsonaro seems to have little response,” https://www.cnn.com/2021/03/27/americas/brazil-covid-19-collapse-intl/index.html)
Brazil’s confirmed COVID-19 deaths now number more than 312,000 and continue to climb.
The numbers of people in their 20s, 30s, and 40s who are critically ill and dying are spiking with the spread of the P.1 variant. According to Diego Montarroyos Simões, an intensive-care doctor reached by the WSJ: “We’re seeing patients who aren’t obese, who have no comorbidities, who are not old but, even so, the virus just overwhelms them.” The numbers validate the doctor’s assertion. Thirty percent of those dying of COVID-19 in Brazil are now under the age of 60. (“Covid-19 Variant Rages in Brazil, Posing Global Risk.” https://www.wsj.com/articles/covid-19-variant-rages-in-brazil-posing-global-risk-11616845889)
In the Brazilian state of Parana, a recent study found that the low case fatality rate that COVID initially incurred among people in their 20s has tripled, while the case fatality rates among adults in their 30s, 40s, and 50s has doubled (“Sudden rise in COVID-19 case fatality among young and middle-aged adults in the south of Brazil after identification of the novel B.1.1.28.1 (P.1) SARS-CoV-2 strain: analysis of data from the state of Parana,” https://www.medrxiv.org/content/10.1101/2021.03.24.21254046v1).
See the WSJ’s March 19 video for an arresting look at the situation on the ground in Brazilian hospitals: “Inside Brazil’s Fight Against P.1, a Fast-Spreading Covid-19 Variant,” https://www.wsj.com/video/inside-brazils-fight-against-p1-a-fast-spreading-covid-19-variant/0D5D73CA-BC74-4B4C-B04B-1D62E03D3847.html.
In the face of a COVID onslaught, what vaccines can do to mitigate Brazil’s crisis becomes a reality only as shots go into arms, and the P.1 variant that originated in Manaus complicates the situation, as vaccines offer less robust protection against it. Brazil’s procurement and rollout of vaccinations has been tragically slow, as The New York Times reported back in February (“Brazil Is Brilliant at Vaccinations. So What Went Wrong This Time?” https://www.nytimes.com/2021/02/28/opinion/brazil-covid-vaccines.html). The country is playing catch-up now. As of March 28, only 1.8% of Brazilians have been fully vaccinated, while 6.4% have received their first shot (https://www.nytimes.com/interactive/2021/world/covid-vaccinations-tracker.html).
The two COVID vaccines used now in Brazil are the Sinovac and the AstraZeneca; and, at long last, the Bolsonaro government has recently successfully negotiated an order for 100 million doses from Pfizer (“Brazil signs Pfizer deal for 100 million vaccine doses: source,” https://www.reuters.com/article/us-health-coronavirus-brazil-pfizer/brazil-signs-pfizer-deal-for-100-million-vaccine-doses-source-idUSKBN2B72LX). Studies indicate that both the Sinovac and AstraZeneca vaccines offer some protection against the P1 variant. See “Exclusive: Study in Brazil indicates Sinovac vaccine works against P1 variant found in Brazil – source,” https://www.reuters.com/article/us-health-coronavirus-brazil-sinovac-bio/exclusive-study-in-brazil-indicates-sinovac-vaccine-works-against-p1-variant-found-in-brazil-source-idUSKBN2B023U, and “Existing vaccines may protect against the Brazilian coronavirus variant,” https://www.ox.ac.uk/news/2021-03-18-existing-vaccines-may-protect-against-brazilian-coronavirus-variant.
Brazil was to receive more than a million doses of the AstraZeneca vaccine on March 21 (“Brazil will receive the first vaccines against COVID-19 through the COVAX Mechanism this Sunday,” https://www.unicef.org/lac/en/press-releases/brazil-will-receive-first-vaccines-against-covid-19-through-covax-mechanism-sunday). At this point the country has contracted to receive vaccines from a number of sources.
(“Timeline: Tracking Latin America's Road to Vaccination,” https://www.as-coa.org/articles/timeline-tracking-latin-americas-road-vaccination)
At the same time, however, President Bolsonaro has stated emphatically that he will not take the vaccine and has joked on Twitter that vaccination would be required only for his dog (“Brazil's Bolsonaro says he will not take coronavirus vaccine,” https://www.reuters.com/article/us-brazil-bolsonaro-vaccine/brazils-bolsonaro-says-he-will-not-take-coronavirus-vaccine-idUSKBN28704L). This is, of course, just the last of many disastrous moves by Bolsonaro to derograte COVID-19 and weaken his country’s response to it. For a thorough rundown see “Bolsonaro has turned Brazil into a global pariah,” https://english.elpais.com/usa/2021-03-09/bolsonaro-has-turned-brazil-into-a-global-pariah.html.
We will be monitoring the situation in Brazil and beyond over coming weeks and months to assess impacts and alter investment strategies as events unfold, but we already know that the size of the COVID shock delivered by variants in South America and in Europe is growing daily.
David R. Kotok
Chairman of the Board & Chief Investment Officer
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