(Bloomberg) -- As Brazil solidifies its status as the world’s new coronavirus hotspot with another record day for infections and deaths, the nation’s disjointed response is fueling concern that the worst is yet to come.
There’s no health minister after two officials who occupied the top post left following clashes with President Jair Bolsonaro, who has dismissed efforts to slow the disease’s spread. Only about 800 of the 15,000 ventilators bought by the federal government have been distributed due to problems with logistics. Sao Paulo, the epicenter of cases and the country’s financial hub, announced a last-minute, six-day public holiday after plans to restrict traffic flopped, sowing confusion among businesses and workers. On Tuesday, U.S. President Donald Trump said he’s considering a ban on Brazilians traveling to the U.S.
Investors are growing increasingly concerned that leaders aren’t up to the task at hand as cases soar. In the past few days, Brazil has overtaken Spain, Italy and the U.K. and now trails only Russia and the U.S. in confirmed Covid-19 infections. The latest data show 271,628 people have tested positive, and almost 18,000 deaths from the disease -- numbers that don’t reflect the true scope of the outbreak given a widespread lack of testing. Meanwhile, Brazilian stocks and its currency are the world’s worst performers.
“In Latin America, Brazil is the country where the government seems to be working against the stabilization of the disease the most,” said Patricia Krause, Latin America economist at French insurer Coface. “Testing is a problem, and there’s nothing to show we’re near the peak of contaminations. The lack of cohesion from the federal and state governments is making things out of control.”
On Tuesday, Brazil reported 17,408 new confirmed cases and 1,179 deaths registered over the past 24 hours -- both records.
Home to 210 million people and Latin America’s largest economy, Brazil was ill-prepared for the arrival of the pandemic. The public health system was on the verge of collapse in several states long before the outbreak. There haven’t been national guidelines on quarantines, leaving states and cities to implement their own wildly divergent and contradicting measures while Bolsonaro, worried about the impact the pandemic will have on the economy, has pushed for everyone to get back to work.
The government doesn’t have the money to provide much aid to companies or the 25% of the population classified as impoverished, many of whom simply can’t afford to stay home. Some 14 million people live in favelas, cramped quarters which make social distancing nearly impossible.
Early economic indicators paint a dire picture: Industrial production sank 9% in March, and April vehicle production was the lowest since 1957. Forecasts show gross domestic product contracting as much as 7% this year, with unemployment potentially doubling.
Amid anxiety about the health and economic fallout from the pandemic, Brazil is also dealing with a fresh political crisis. Bolsonaro has lost three cabinet members since the start of the outbreak, including the two health chiefs, and is fighting off an investigation into alleged attempts to interfere with the federal police. He has denied wrongdoing.
Investors are getting out as fast as they can. The biggest exchange-traded fund tracking the country has seen outflows almost every day since late April. Hedge funds have cited a “mist of uncertainties” and a “perfect storm” when referring to Brazil’s outlook, and Schroders warned that the country could be the last to exit social isolation measures.
The turmoil shows in asset prices, with routs that stand out even in a grim year for emerging markets. The Brazilian real is down about 30% this year, by far the worst-performing currency in the world. The benchmark Ibovespa index has lost more than half its value in dollar terms, also lagging behind all major peers. The spread between the share price of the biggest developing-nation ETF and the one dedicated to Brazilian equities has widened to the highest on record.
Sao Paulo’s last-minute holiday was the most recent point of contention with investors. On Monday, the mayor announced days off on Wednesday and Thursday, bringing forward holidays scheduled for later this year, in a bid to get more people to stay home. More than 24 hours later and after much back and forth, the stock exchange says it will remain open on those days.
“It’s clearly a time of a lot of uncertainty, and no one wants to be too exposed to Brazil,” said Sergio Zanini, founding parter at asset management firm Sagmo.
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