The emerging nations have two advantages when it comes to the coronavirus. However, these advantages seem extremely slim when one considers the vulnerability of these countries.
After hitting China, Europe and the USA, the shockwave of the coronavirus epidemic is reaching the emerging nations of Southern Asia, Latin America and Africa – where per capita income is 5% to 30% of that of OECD member countries. Although emerging nations have greatly benefited from a period of globalization that has narrowed the gap with rich countries by a third, and although they were relatively spared from the effects the 2008 crash, the pandemic is hitting them in full force and could break the momentum of their economic take-off.
The emerging nations have two advantages when it comes to the coronavirus. Firstly, they have a young population. In Africa, only 4% of the population is over 65, as opposed to11% in China, 16% in the USA and 20% in France. Secondly, the public authorities and society as a whole have acquired some experience in dealing with public health crises in their fight against SARS and MERS in Asia, Zika in Latin America and Ebola in Africa.
However, these advantages seem extremely slim when one considers the particular vulnerability of emerging nations. On the healthcare front, their systems are undersized and defective – for example, Senegal has only 56 ICU beds for 17 million inhabitants – and most of them have no biomedical industry, with the notable exception of India. The severe recession caused by the pandemic is worsened by the oil counter-shock which has caused the price of the barrel to fall by 63%, and by the collapse of commodity prices – including agricultural produce. At a time when the emerging nations should be attempting to ensure the solvency of demand and the survival of businesses, they are being confronted with the closure of capital markets, the outflow of capital (over $80 billion left Southern Asia, Africa and Turkey in just a few weeks), a halt in money transfers from emigrants which account for 5% to 10% of GCP, and a halt in international aid. Furthermore, there a particular humanitarian crisis emerging as whole groups of the population fall into extreme poverty, alongside food, water and electricity shortages.
With the exception of populist leaders like Jair Bolsonaro in Brazil, the leaders of emerging nations have learned their lesson from previous epidemics. They are aware of the dangers and have taken quick action.
However, their efforts are limited by the means at their disposal, by the weakness of public institutions and the evils of maldevelopment.
Lockdown is impossible to enforce in a country as densely populated as India or in African towns where 70% of the population live in shantytowns and have no choice but to travel to work every day in order to survive.
The grey economy that encompasses over half of business activity in sub-Saharan Africa makes it very difficult for governments to guarantee production, employment and income. These governments are not able to borrow 10% to 20% of their GDP even though their debt is lower than that of developed countries and the humanitarian aspect has deepened the crisis. Furthermore, most central banks, particularly in Africa, do not have the necessary skills to undertake large-scale purchases of public or private assets. Finally, it is very difficult to come to the aid of the poorest of the population who live outside the net of any official channels.
The windfall economies supported by predatory governments and authoritarian and populist powers will be particularly affected – e.g. Algeria, Angola, Venezuela, Ecuador and Brazil – whereas countries with a diversified economy and high-quality governance – such as Morocco, Togo, Ghana, Rwanda, Chile and Colombia – should quickly be able to return to high growth.
On the geopolitical front, this crisis exemplifies the expunction of the USA and the affirmation of China’s leadership over the emerging world. This has been effected by means of three channels: through health diplomacy, i.e. delivering protective material, medical equipment and medicines; by financing governments through investment programs in the “new silk roads” and by swap agreements with the Bank of China which supplies central banks with convertible yuan that are immediately converted into purchases of Chinese products; and by taking control of multilateral institutions vilified by Donald Trump and abandoned by the other Western democracies – as symbolized by the trusteeship of the WHO. All this underlines how important it is for Western democracies to re-engage with the emerging nations and with the multilateral system – most particularly for Europe and support for Africa.
(Column published in Le Figaro, 13th April 2020)