São Paulo not working for a lockdown

. May 19, 2020
Woman walks in São Paulo. Photo: Nelson Antoine/Shutterstock Woman walks in São Paulo. Photo: Nelson Antoine/Shutterstock

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We’re covering why São Paulo has avoided a full-scale lockdown that is well overdue. Brazil’s growing Covid-19 curve. And the impacts of the pandemic on private banks.

Avoiding lockdown, São Paulo grapples with rushed solutions

Many experts have praised the synergy between São Paulo Mayor Bruno Covas and Governor João Doria in fighting the coronavirus.

On one crucial topic, however, they are not in sync: should a full-scale lockdown be enforced, or not? Mr. Covas is certainly worried about a healthcare collapse in the city. After all, São Paulo has to deal with its 12 million population and the residents of its wider metropolitan area who depend on its public services. But, as far as Governor Doria is concerned, there is &#8220;no lockdown on the horizon&#8221; for Brazil&#8217;s most populous city.</p> <ul><li>While Mr. Covas does have the power to place the city under lockdown, his 6,000-strong municipal guard would be unable to enforce restrictive measures. He would require the acquiescence of Governor Doria who has jurisdiction over the police forces in the state.&nbsp;</li></ul> <p><strong>Why the resistance?</strong> President Jair Bolsonaro is not the only one over-politicizing the pandemic. Mr. Doria, unabashed in his hopes to run for president in 2022, is carefully measuring each step during the pandemic to enhance his political capital. Placing the country&#8217;s financial and industrial heart under strict lockdown would be anything but a popular move.&nbsp;</p> <ul><li>Moreover, the Military Police <a href="https://www1.folha.uol.com.br/cotidiano/2020/05/doenca-estabilizada-e-falta-de-pm-tiram-lockdown-do-horizonte-de-sp.shtml">warns</a> that the number of troops deployed in the state capital would need to be doubled in order to enforce stay-at-home orders — which is anything but a simple operation. And a failed lockdown could be even more devastating for the governor.</li></ul> <p><strong>Botched solutions.</strong> Local powers are trying every solution available to them before resorting to lockdown. To encourage people to stay at home, the city of São Paulo announced <a href="https://brazilian.report/newsletters/brazil-daily/2020/05/12/essential-jobs-how-bolsonaro-plans-to-force-brazil-back-to-work/">blockades of some of its major avenues</a> (which saw ambulances stuck in traffic jams) and vehicle restrictions (which made public transport busier). Now, Messrs. Doria and Covas plan to bring forward 2020&#8217;s state and municipal holidays and create a 6-day &#8220;weekend&#8221; between May 20 and 25. &#8220;Social isolation rates go up during weekends and holidays, which helps contain the pandemic,&#8221; Mr. Doria told reporters.</p> <p><strong>Yes, but … </strong>Essential services that continue operating during the crisis will have to double their daily wages —&nbsp;precisely at a moment when companies are battling cash flow problems. Representatives from construction, food, and pharmaceutical companies said their sectors were not consulted.</p> <p><strong>Why it matters.</strong> Like New York in the U.S., São Paulo is by far Brazil&#8217;s most populous region and the country&#8217;s coronavirus epicenter. But their responses have been quite different. New York state enacted stay-at-home orders on March 22, which will only expire on May 28 —&nbsp;the move drove the infection curve down, and regional reopenings have started already. In São Paulo, no one really knows when the outbreak will reach its peak.</p> <ul><li>The state government argues that the Covid-19 death curve has stabilized, but that might be more due to a lack of testing in Brazil and the fact that many people have avoided going to the hospital due to coronavirus fears, increasing the number of potentially unaccounted for Covid-19 deaths.</li></ul> <p><strong>Bottom line.</strong> Many countries in the world adopted lockdowns <em>before</em> healthcare systems collapsed. That might not be the case in São Paulo.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazil breaks into Covid-19 top 3</h2> <p>With 254,220 confirmed coronavirus infections, Brazil has become the third country with most cases in the world, behind only the U.S. and Russia. It is also the sixth country with the most deaths at 16,792. The contagion rate in Brazil has dropped from 3.5 to 1.4, meaning that every two infected Brazilians will contaminate three people. That is still a high number, and it is only based on <em>known</em> cases.&nbsp;</p> <ul><li>The problem is: Brazil has tested much less than any of the other countries in the top 15 (with the exception of China, for which data on tests per 1 million people is not available). Some estimates believe that Brazil&#8217;s real numbers could be up to 12 times higher.</li></ul> <div class="flourish-embed flourish-scatter" data-src="visualisation/2454111" data-url="https://flo.uri.sh/visualisation/2454111/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-scatter" data-src="visualisation/2454277" data-url="https://flo.uri.sh/visualisation/2454277/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> Despite the curve continuing to grow, many states are already moving to reopen their economies. Meanwhile, the federal government has lacked leadership in handling the crisis, with the Health Ministry becoming a revolving door —&nbsp;two ministers have been pushed out in the space of one month.</p> <p><strong>Not much strategy.</strong> Brazil&#8217;s main Covid-19 policy has become endorsing and distributing an unproven drug — antimalarial medicine chloroquine.</p> <p><strong>Not a &#8216;great equalizer.&#8217;</strong> While Covid-19 was brought to Brazil by elites traveling to Europe, it has affected lower classes much harder since. In about a month, cases in peripheral communities jumped from 33 to 55 percent of total infections, mostly among non-whites. Poorer patients have also shown higher mortality rates.</p> <hr class="wp-block-separator"/> <h2>Pandemic not all bad on Brazilian banks</h2> <p>As many have pointed out, the pandemic has accelerated many processes that were already in motion. For instance, Brazilian banks have been forced to rapidly rethink their business models, which rely heavily on high interest rates and fees. Last year alone, the financial system amassed BRL 28.7 billion (USD 5 billion) in fees alone. But with fintechs offering banking services for no cost and the economic slowdown, big players are having to adapt.</p> <ul><li>Brazil&#8217;s largest privately-owned bank Itaú Unibanco suspended a plan to increase fees on withdrawals, statement requests, checkbooks, and money transfers. Bradesco could pull a similar move.</li></ul> <p><strong>Why it matters.</strong> Banks have benefited from a lack of competition for decades. But recent moves by the Central Bank aimed at reducing market concentration are having an effect.</p> <p><strong>Half-full.</strong> While banks are losing some of their bread and butter, the increased risk has led many people to avoid high-risk investments, in favor of traditional savings accounts. Over the past three months, Brazil&#8217;s top 4 banks combined for a deposit base of BRL 1.8 trillion, the highest since measurement began in 2014.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>WHO 1.</strong> Over 120 countries, including Brazil, have supported a proposal by the European Union for an &#8220;impartial and independent&#8221; investigation into the World Health Organization&#8217;s Covid-19 response. Spearheaded by U.S. President Donald Trump, criticism towards the WHO includes global leaders, health experts, and analysts. Some lash out at the organization for trusting China too much, even if the Asian giant tried to conceal the outbreak in Wuhan at the beginning of the year. Others say it took the WHO too much time to sound the alarm and declare a pandemic.</li><li><strong>WHO 2.</strong> The EU&#8217;s proposal was much softer in tone than one pushed forward by Australia — and backed by Brazilian Foreign Minister Ernesto Araújo — specifically calling out China. </li><li><strong>Amazon.</strong> As Google searches for &#8220;emergency aid&#8221; rose 5,000 percent, the Economy Ministry struck a deal with tech giant Amazon so that virtual assistant Alexa can provide users in Brazil with information on the three-month BRL 600 benefit to informal workers and vulnerable populations. However, Amazon&#8217;s Alexa-equipped smart speakers cost at least BRL 250 when on sale — not exactly catered to the demographic eligible to receive the aid.</li><li><strong>Fuels.</strong> As international oil prices recover some ground lost earlier this year, Petrobras will raise diesel prices in refineries by 8 percent, in its first price increase of 2020. Still, the fuel price has fallen 40 percent since January 1.

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