Chile’s experience, of having partially lifted lockdown and seen a surge in Covid-19 cases, should serve as a warning to other Latin American countries.
Chile’s death toll from Covid-19 surpassed 1,000 on Monday, with 105,000 confirmed cases, with the government having re-imposed a lockdown in mid-May following a partial opening of the economy that, it is believed, led to a surge in new cases.
On May 25th, Chile’s President Sebastián Piñera announced that the country’s healthcare system was “close to the limit”, a week after the government had re-imposed lockdown measures in Santiago in response to a surge in cases, with retail outlets, including shopping malls, having reopened for business.
The post-lockdown surge should serve as a warning to other countries in the region as they prepare to lift restrictions and allow some industries to reopen. Mexico, for example, began a partial return to work on Monday June 1st, with key industries such as construction and mining reopening, with the automotive sector having restarted operations two weeks previously, in part as a result of supply chain pressure from suppliers in the US, where the industry had already resumed operations. Mexico’s President Andrés Manuel López Obrador warned on Monday that any surge in Covid-19 cases as a result of the reopening would lead to a return to lockdown.
In response to the economic impact of the pandemic on the country, President Piñera on May 27th announced a series of austerity measures within the government, introducing legislation to trim remunerations and salaries for parliamentarians, as well as for the president, ministers, mayors, governors and other government officials. The extent of the cuts is to be decided by a council of civil servants, set up to avoid conflicts of interest among congress members, and which will have 30 days to announce its decision. “Reform is fair and necessary, which will improve our democracy,” President Piñera tweeted when announcing the impending cuts.
New Strategies Needed
As Covid-19 cases continue to increase, Chilean scientists have called on Piñera to implement new strategies to contain the virus, and “to avoid a national catastrophe”, according to a report by TeleSur. In a petition signed by dozens of researchers and entities of the country’s Health Guild, the health professionals called on Piñera to urgently act. "We have surpassed China in the number of infections and exceeded the global average of world mortality with 46.3 deaths per million inhabitants, with no signs of slowing the outbreak," the statement said, as intensive care units in Santiago are at full occupancy, while the occupancy rate is 87% and increasing, according to the Chilean Society of Intensive Medicine (SOCHIMI).
The health professionals stressed that a change in strategy is urgently needed, in order to cut the chain of contagion, which includes massive and systematic testing, with a broad, comprehensive, inter-sectorial and interdisciplinary social approach, for the protection and well-being of community. "The international scientific evidence is clear: the basis of the confrontation must be a timely and active strategy in testing, detecting, searching for cases, reporting, tracing, isolating infections and following up on all of them," they added. Undersecretary of health Paula Daza said in a televised address on Sunday: “We know we are in the most difficult weeks. We are making decisions and taking measures every day to contain the spread.”
President Piñera has announced an acceleration of food distribution to help citizens affected economically by the pandemic, and called on all the country’s political parties to participate in the creation of a new ‘social pact’ to counteract the economic and social impact of the pandemic. He said the country’s politicians needs to analyze “how to strengthen our social protection system to protect Chilean families, and how to strengthen our capacity to recover the possibility to create jobs, improve salaries and help small and medium-sized businesses, and reactivate the economy.” And on Monday, Piñera announced the launch of a mental health portal allowing Chileans to seek help, given the social distancing measures that are affecting people psychologically and emotionally, and impeding their carrying out of professional and academic activities.
Chile’s central bank has confirmed that April was the country’s worst month on record in terms of economic contraction, with a slump of 14.1% in its monthly economic activity index, but which does not include the mining sector, which registered a much smaller drop, of 0.1% in April. Investment bank Banchile Inversiones predicts that the figures for May will be similar, however, and Banco Santander also estimates a slump of 15% for May, given that the country’s quarantine measures lasted the entire month, after having been extended by the government for a further week in late May to counteract the spread of the virus in the capital Santiago and the metropolitan area, as well as three other communes or municipalities. More than 80% of Covid-19 deaths occurred in May.
Finance Minister Ignacio Briones said on Monday he expects results from the month of May to show “a very significant drop” as measures to contain the spread of the coronavirus impact the country’s output.
Chile’s economy had already suffered the effects of protests that broke out late last year against rising living costs, and which were violently repressed by security forces. As a concession to the protesters, Piñera’s government had pledged to hold a referendum in April to draw up a new constitution, one of the protesters’ demands, given that the current constitution dates from the era of Augusto Pinochet’s 1973-90 dictatorship. However, in the light of the spread of the Covid-19 pandemic, the government announced in March that the referendum would be postponed to October.
In a sign of the economic damage wrought on the country by the pandemic, Chile-based Latam Airlines, the region’s largest carrier, filed for Chapter 11 bankruptcy protection in the US on May 25th. The collapse in demand for flights, coupled with the prohibition of airline arrivals in Argentina and Colombia, also led to the collapse of Latin America’s second-largest airline, Colombia’s Avianca, a few weeks previously. Latam Airlines, which reported a $2.12 billion first-quarter loss, is continuing to fly during its restructuring, has received a pledge of assistance from the Chilean government, with Economy Minister Lucas Palacios saying: “We are arranging all facilities so that, as quickly as possible, LATAM can quickly get out of the situation that is afflicting it, as well as the rest of the airlines”. The airline, which directly employs around 10,000 people in Chile, said it had also secured financial support from shareholders including Chile's Cueto family and Qatar Airways of up to $900 million in debtor-in-possession financing.
The country is also poised to receive assistance from the International Monetary Fund (IMF), which announced on May 30th that it has approved a two-year flexible credit line for the country, equivalent to SDR 17.443 billion (about $23.93 billion). Unlike traditional IMF-supported loans, the disbursement is not conditioned on compliance with policy targets. The IMF said in a statement that the flexible credit line is justified by the country’s track record. “Chile’s very strong fundamentals, institutional policy frameworks, and track record of implementing prudent macroeconomic policies have been instrumental in absorbing the impact of a series of recent shocks,” Kristalina Georgieva, the IMF’s managing director, said. She added that, notwithstanding its very strong fundamentals, Chile’s economy is “exposed to substantial external risks as a result of the ongoing Covid-19 pandemic.”