Zika pandemic fears grow amid weakening LatAm economy
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Emerging Markets

Zika pandemic fears grow amid weakening LatAm economy

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Although economists do not believe the Zika virus will have a major impact on an already weak economy, governments will need to fill a shortfall of investment to prevent further human tragedies, experts have warned

Chronic underinvestment in water and sanitation in Latin America is the main cause of the spread of epidemics such as the Zika virus, a leading expert warned yesterday as the outbreak threatens to hurt an already weakened regional economy.

The need is particularly acute in Brazil where Zika has spread further than in other countries.

The Brazilian government would need to invest around BRL16bn (around $4bn) a year over 20 years to improve standards of water and sanitation to deal with the problem.

However, official figures show that it is only due to invest little more than half of that amount this year — BRL8.5bn. Lack of proper sanitation often leads people to store water inadequately, which favours the proliferation of mosquitoes.

“Every year, we have the repetition of the same epidemic scenario in Brazil,” said Gesner Oliveira, a water and sanitation expert, and former president of Sabesp, the São Paulo water and sanitation company.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), Brazil ranks 16 out of 26 Latin American countries in terms of quality of water and sanitation. “You need to attack this issue aggressively,” said Oliveira.

“Although there are no specific surveys on this issue, it is reasonable to think that Brazil is more vulnerable [to this sort of epidemic] than other countries in the region due to the poor quality of its water and sanitation.

“Of course, there are other factors at play, such as the climate and the level of rainfall, but without a doubt the fragility of sanitation is a factor of weakness,” he said.

So far the World Bank has estimated the impact of the Zika virus at about to $3bn dollars, or 0.06% of global GDP.

Jim Yong Kim, president of the World Bank, told Emerging Markets that the Zika virus had behaved differently from previous outbreaks in a way that experts “feared most”.

“What I have been hearing and talking with leaders from that region is that they’re now much more serious about and interested in developing the pandemic response systems that we know need to be in place, and Zika is really a classic example of an old virus that behaves differently, one of the things that we fear the most.”

The World Health Organisation estimates that 4 million people will be affected by the Zika virus this year in all countries in the Americas, apart from Chile and Canada, including 1.5 million in Brazil.

Colombia is also seriously affected by Zika, which may lead to serious brain damage in new-born babies (microcephaly) or even to the rare neurological Guillain-Barré syndrome.

IDB INVESTMENT

Earlier this year the Inter-American Development Bank announced it was channelling $180m to stop the disease from spreading. Hector Salazar Sanchez, the IDB’s social department manager, told Emerging Markets on yesterday that the immediate action would be focused on drinkable water and sanitation.

Oliveira said the three main risk factors were over water, waste disposal and drainage. Firstly he said that if people feared they would suffer from a lack of water, they might “start to store it in buckets or in an inappropriate manner which could lead to the proliferation of mosquitoes.

“The second aspect is the lack of landfills to dispose of solid waste. And you also need to invest in draining facilities to avoid flooding.”

While economists such as Capital Economics do not believe the financial impact will be a major drag, there are already signs that it is affecting business and trade.

China intends to demand Zika-free certificates for some Brazilian exports after traces of the Aedes mosquito, which transmits the diseases, were found in meat shipments.

Brazilian exporters, who sold $35.6bn to China last year, say this would amount to a non-tariff barrier. Italy is also said to be monitoring the situation.

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