MBA. Hellen Ruiz Hidalgo
Strategic Communicator - OCEX-UNED

1. Chronology of the Covid-19 pandemic: outbreaks, detection and responses

Covid-19 activated health alerts worldwide. The new strain of the virus had an epicenter in Wuhan City, China and has spread to more than 176 countries worldwide, with more than 13.000 deaths among 310.000 diagnosed cases (rtve, 5:00 pm, March 22, 2020).

On Dec. 8, 2019, the beginning of a new infection was detected for the first time, according to the WHO. The new infection had already become epidemic on December 12, 2019, four days later. By January 20, 2020, it had caused 198 laboratory-confirmed infections with three fatal cases.

Between December 22 and 24, just eight days after the detection of the epidemic, the new virus had been genetically sequenced and the first clinical studies of its evolution were published. It was named 2019-nCov, then SARS-CoV-2. Internationally it is now better known as covid-19, (acronym for Corona virus disease 2019). On December 31, WHO received the first alert.

The importance of presenting these dates is to provide an opportunity to assess the different rates of transmission and also of response by countries.

It was only until January 23, 2020, that is, 46 days after the first case was detected, that it was decided to close the city. Trains and planes from Wuhan were not allowed to leave the town and the highways were blocked. The metropolis of Wuhan, with 11 million people, was thus isolated from the world in the hope of stopping the epidemic.

South Korea: On January 22, the first infections were announced in South Korea. Their reaction was immediate. With the massive launch of infection detection and isolation measures for all those detected, it seemed at first that the infection was contained, with 30 cases detected. But almost a month after the first outbreaks, on February 29, the positive cases skyrocketed to an alarming 3150. Patient 31 went undetected and was a super spreader who passed it on to thousands of people. Since the virus spreads before people show symptoms, by the time authorities realized the problem, the virus was already out there. Now they're paying the price for that one case. Even so, the epidemic is already contained.

Iran: February 19 closed its borders after the first cases were confirmed.

Italy: On February 1st, the first registrations occurred. Only one month later, it decreed quarantine in part of the north of the country for coronavirus.

According to an analysis of the 72,342 cases diagnosed in China as of February 11, the disease is mild for 81% of patients, 14% show more severe symptoms, and 4-5% enter critical condition. Worldwide, in 160 affected countries, at the time of writing, out of 218,827 confirmed cases, 84,121 have recovered and there have been 8,811 deaths. This confirms the publicized proportion (80-15-5): 80% of those infected have very mild symptoms or are not even aware of being infected, 15% need hospital support, 4% are serious cases. Between 1% and 3% are fatal.

Costa Rica: The Global Health Security Index 2019 (GHS Index) is the first comprehensive assessment of the global health security capacities in 195 countries, evaluated in 2019 (Link from GHS Index: https://www.ghsindex.org/; link from the Health Security Profile of Costa Rica 2019 is: https://www.ghsindex.org/country/costa-rica/) 

In the Global Health Security Index, the average country score is 40.2 out of 10. Developed countries score 5.9 on average. Costa Rica has a rating of 4.5. It ranks 62nd out of 195 countries.

On 6 March, the first infection was detected in Costa Rica. On 13 March, seven days later and with 23 confirmed cases, the health authorities took the first steps in a very hesitant manner. "I know that there are countries that are taking very, very extreme measures because of the coronavirus, and that there are people who expect us to do the same in Costa Rica," said Health Minister Daniel Salas Peraza. And he added: "Based on the criteria of qualified experts at the national level and recommendations of the World Health Organization (WHO), we are taking measures that do not turn off the activity of the country as a whole”.

However, events in other countries led the country to take extreme measures very quickly. On March 16, decrees of social isolation were issued. The imminent economic impact created an atmosphere of national unity among all the currents that supported economic relief measures.

2. Overall economic impact of covid-19

China's National Bureau of Statistics reported a record drop in industrial production (which measures manufacturing, mining and public service activity), which fell 13.5% year-on-year, the first contraction since January 1990. Retailing is a key indicator of the state of consumption in the world's second largest economy and fell by 20.5% year-on-year, the largest collapse on record. While investment in fixed assets-which reflects spending on items including infrastructure, property, machinery and equipment-went down 24.5% year-on-year, another record low.

These data also add to the poor figures for the manufacturing industry in February, which was at its lowest level since 2005, as released earlier this month.

The drop is largely the result of measures taken by China to contain the spread of the virus in the territory, including the closure of factories or shops across the country for weeks after the Lunar New Year holiday, which is already a severe setback. From the beginning of this crisis, one thing has been clear to economists: that covid-19 affects both extremes of the economy, both the supply chain and demand.

The supply of goods and services is affected because factories and offices close and production falls as a result. And at the same time, demand is also affected because consumers stay home and stop spending.

According to the National Business Index of the research firm Trivium, as of March 16th the Chinese economy was operating at 69.5% of normal production. "The restrictions on industrial activity have mostly been solved. The major concern now for companies is weak demand," said the firm.

Despite the government's efforts to redirect the country towards a more domestic demand-based model, the world's second largest economy remains heavily dependent on foreign demand, and is thus greatly affected by the situation in other countries.

"While conditions at home should gradually improve in the coming months”, warned Evans-Pritchard of the British consulting firm Capital Economics, "the increasing global disruption from the coronavirus will slow the pace of recovery”.

Estimates from different agencies have been adjusted as the virus progressed and the latest forecasts from banks such as ING put China's GDP growth for 2020 at 4.8%, which would be the biggest slump in three decades. And, in a hyper-connected world, where China today has great weight -representing a third of the world's manufacturing and the largest exporter of goods in the world-, whatever happens in the Chinese country will have a global impact.

The virus, according to the Organization for Economic Cooperation and Development (OECD), represents the "greatest threat to the global economy since the financial crisis of 2008" and estimates that there could be the lowest growth rate since 2009 due to the outbreak.

In early March, the United Nations Conference on Trade and Development (UNCTAD) predicted that the coronavirus could cost the global economy up to US$2 trillion this year. Globalization is causing economic estimates of the impact of the pandemic to vary as more countries adopt new and different measures to contain the virus, greatly affecting the world economy.

The closures in Spain and Italy are an example of the drastic actions that some governments have taken in an attempt to curb contagion.

On the supply side, the decline in activity at the so-called "world factory" has already had consequences: restrictions have affected the value chains of large companies such as the car manufacturer Nissan or Jaguar, Land Rover, for example. The latter pointed out that it had had to move car parts in baggage because some factories had run out of supplies. On the demand side, sectors such as tourism are being tremendously affected following restrictions on the transport of people and the cancellation of major events.

The consulting firm McKinsey differentiates between two scenarios: (1) a rapid recovery, in which the virus is found to be seasonal and by autumn governments have the tools to stop it; (2) a global slowdown, in which the virus is not seasonal and countries must maintain infection prevention measures even if they control the epidemic, as in the case of China.

In the case of Latin America, for example, the consulting firm McKinsey estimates that in the first scenario growth estimates would fall by only 0.5%, while in the second scenario growth forecasts would be reduced by 38%.

Countries that depend on the sale of raw materials, as is the case for Latin America, are in a precarious situation, UNCTAD warned.

"Heavily indebted developing countries, particularly commodity exporters, face an exceptional threat" due to lower export returns linked to a stronger dollar, warned Richard Kozul-Wright, director of UNCTAD's Division on Globalization and Development Strategies.

Encouraging awareness of the economic impact of this crisis is one of the reasons that may have led China to publish its bad numbers this month, according to experts like Alicia García Herrero, chief economist for Asia-Pacific at NATIXIS.

"One important reason China may have published such bad numbers, beyond helping (to achieve) the V curve, was to warn the world of how bad the situation may get for them and to encourage the Fed and others to react to the fading global demand," she said on Twitter. "Let's call it 'coordination by threat'”.

3. Impacts of covid-19 on foreign trade and services in Costa Rica

Covid - 19 cools down the country's exports and imports The Costa Rican companies indicate logistical problems, both in exports and imports. Let's look at different scenarios of their impact.

The impact generated in the export sector. Costa Rican foreign trade companies report the slow progress of shipments and landings at Asian ports, delays in the return of containers and the "cooling" of purchases in the countries to where Costa Rica exports, as a result of the impact on markets and logistics of the coronavirus covid-19.

Laura Bonilla, president of Cadexco, indicated that there are delays in the arrival of raw material, mainly from Asia, and that it is also possible that shortages of equipment will be generated.  She received reports from companies about logistical problems, both in exports and imports. In addition, there have been seven cancellations of international fairs in where Tico exporters had planned to participate.

The president of the National Chamber of Producers and Exporters of Pineapple (Canapep), Abel Chaves, explained that the problem is focused on the congestion of the docks in China. This makes the cargo take longer to reach the market. Chaves revealed that in this situation, shipping companies are charging additional fees.

There are delays and minor sales from keeping fruit and other products on the Chinese docks. He said this extra charge is between $1,000 and $1,500 per container. The major dilemma faced by the companies has to do with the flow of goods, due to the delay in the return of containers (mainly refrigerated ones) due to the slow landings and shipments in the ports, especially in Asia. In this regard, one of the export sectors that has been hit hardest is beef. Livestock farmers had made significant progress in placing the product in China, but since January container unloading has been delayed because of the drop in activity in Chinese ports.

For pig farmers the reality is different. Romulo Chaves, president of the National Chamber of Pig Farmers, said that even none of the scheduled shipments have been delayed, but recalled that this sector just started exports in early February and therefore does not require much space on ships so far.

Bonilla noted her concern that the longer a product is delayed on the ship, the higher the cost and the impact on its shelf life, especially for perishable products, which translates into both economic losses and damage or loss of the product.

Specific impact on pineapple exports. The Dutch market has already reduced purchase orders for pineapple. The Costa Rican private sector warned this Tuesday March 17 about a collapse in businesses and employment as a result of the measures taken to address the emergency by the new coronavirus.

For its part, the president of Cadexco, Laura Bonilla, revealed that since last week shipments of products such as roots and root vegetables to Italy were suspended, while the National Chamber of Producers and Exporters of Pineapple (Canapep) reported that in the Netherlands suppliers of schools, bars and restaurants stopped buying Costa Rican pineapple.

In the service sector, the impact on domestic tourism is noteworthy. Hotels report more than 10,000 cancelled nights. Costa Rican hotels report more than 10,000 cancelled nights and expect a drop of between 80% and 90% in future bookings, following the measures announced by the government on Monday, March 16, to curb the spread of the new coronavirus.

The government decreed a state of national emergency and prohibited the entry of foreign and non-resident tourists by air, sea and land. The restriction came into effect on Wednesday, March 18, at 11:59 p.m. and will remain in effect until the same time on April 12.

"Anyone who violates the measures imposed by law or by the competent authorities to prevent the introduction or spread of an epidemic will be punished with a prison term of one to three years, or a fine of fifty to two hundred days”. Criminal Code Article 277.

Javier Pacheco, president of the Costa Rican Chamber of Hotels (CCH), explained to La Nación that the latest data from the sector, before the government's announcement on Monday, already showed significant cancellations in the number of hotel nights. "Now, the biggest concern is not the cancellations we have had, but all those that are coming in the future after the government's decision. The measures being taken in the world and in Costa Rica bring devastating economic consequences for the tourism sector", said Pacheco.

The latest data collected by the CCH, before this Monday, reported falls of 30% and 40% in future reserves. However, with the restrictions imposed, the projection changed to a range of between 80% and 90%. According to Pacheco, the sector understands the importance of taking actions to stop the spread of the disease and, therefore, will respect them and apply them in the 170 hotels affiliated to the Chamber.

Urgent requests and claims from the private sector. Faced with the current emergency situation, Bonilla (Cadexco) requested that the transit of air, sea and land cargo transport be guaranteed; a permanent articulation and communication between regional customs to guarantee common criteria that allow the transit of goods through the Central American Isthmus, and that instructions be issued to entities to facilitate the passage of products.

The complaint was submitted by the Costa Rican Union of Chambers and Associations of the Private Business Sector (Uccaep), the Costa Rican Chamber of Exporters (Cadexco), the National Chamber of Tourism (Canatur) and the Costa Rican Chamber of Restaurants (Cacore).

Álvaro Sáenz, president of Uccaep, said that hard-hit sectors, such as tourism, could begin to lay off staff if urgent measures are not taken to avoid such a collapse. That is why, he added, Uccaep is urging a series of measures in credit, taxes, labour and other fields.

He called for the readjustment of debts and mortgages, as well as credit arrears; to lower value added tax from 13% to 6% while the yellow alert lasts and, thus, to stimulate consumption; that the municipal regime, in solidarity, temporarily annul, during the emergency, all collection of municipal rates and taxes, and to make monetary policy instruments, such as legal reserves, more flexible, in order to lower the financial cost and provide the necessary liquidity.

In addition, the Uccaep representative requested a reduction in electricity tariffs during the emergency, as well as several measures in the labor area. Among them, he mentioned the need to approve the bill that makes the working hours more flexible; also, to pay the labor charges on the work actually done, and the possibility to partially or totally suspend the work contract and, therefore, the payment of social charges. According to Uccaep, if no measures are taken, unemployment will grow rapidly.

Impacts of covid-19 in Costa Rica (as of March 10, 2020)
Exports	Imports
No container rotation.	Delayed arrival of raw materials.
Decrease in the volume exported as the shipping lines are not leaving with the usual frequency.	Closure of the factories in China forces the purchase of more expensive products from other countries.
Customers are stopping buying and there are fewer air traffic operations.	The decrease in the volume of goods means that shipping companies are not leaving as often as usual.
Drop in consumption of products in the countries most affected by covid-19.
Uncertainty in the behavior of strategic international markets such as Europe, the United States, Mexico and the Southern Cone.
Cancellation of 7 international fairs due to security measures (five to be defined).
High costs due to queuing at the ports and re-routing to other ports, distancing the products from the original points of arrival.
Source: Elaboration of the author from Cadexco and La Nación.

José Manuel Quirce, president of the Chamber of Foreign Trade and Representatives of Foreign Houses (Crecex), said that some businessmen are already expressing their difficulties in restocking with imported products. He added that these businessmen are even asking for written notes from their international suppliers, to present them in Costa Rica in case they are probed by the reduction in supply. If the problem continues, there will be a shortage of products or other materials.

Analysis of general impacts in Costa Rica. Tourism, mass entertainment, chains to provide raw materials, education and industry dependent on a single supplier in the world, are among the sectors that, by their nature, are most affected by the emergence of covid-19, says specialist Alberto Trejos, of the Incae Business School.

In the webinar "Coronavirus: economic, social and political impact in Latin America", held on March 12, Trejos said that, on the other hand, companies in the area of telecommunications, suppliers of items for teleworking and those offering elements linked to automation can increase their sales in this situation. The also former Minister of Foreign Trade (Comex) of Costa Rica considered that the situation will accelerate changes in the way companies see different areas, including the incorporation of technology (autonomous trucks would have a great use at this time), management and volume of inventories, teleworking, working hours and production with data management.

The companies will face, he said, on the one hand, a lower demand and, on the other, a possible reduction in production, because they do not obtain raw materials. In addition, he continued, there will be a drop in the price of raw materials, which has different consequences among Latin Americans, depending on their role in the market. Thus, for example, the reduction in the value of oil is good news for Central Americans, but negative for South Americans.

From a political point of view, Trejos pointed out that there are governments that close borders with a high component of xenophobia, as well as the rebirth, under these circumstances, of a populist current. However, from the perspective of the countries, there are also differences: some have excellent health systems, not for this emergency but for all times, and there are those that handle information with transparency and data to adequately prepare the population to face the situation, said the specialist.

4. Economic actions to mitigate the impact of the covid-19

On Saturday, March 7, the Costa Rican government announced a plan of measures to mitigate the negative impacts on the economy, resulted from measures to stop the spread of the covid-19 pandemic.

The provisions seek relief in social charges, in the cost of credit, in tax obligations and subsidies for insurance and special coverage for tourists. Measures are proposed to make credit cheaper, make debt adjustment more flexible, establish temporary tax arrears and improve insurance options.

It also provides for a three-month moratorium on the payment of value added tax, corporate income tax and customs duties, a significant reduction in the monetary policy rate to make credit cheaper, and insurance to enable the tourism sector to deal with the Coronavirus quarantine. These are the first financial measures announced to deal with the effects of covid-19.

Proposals

- Employment protection measures. The President of the Republic, Mr. Carlos Alvarado, urged the Executive President and the Board of Directors of the CCSS to implement the temporary and necessary measures to mitigate the economic and employment effect of the covid-19. To this end, on Monday, March 16, the President of the Republic convened the Board of the CCSS so that, within the framework of its autonomy, it would promptly specify and implement the relevant measures. This means that the social charges would be made proportional to the actually worked time. In addition, it will ask to consider the deferred payment of social charges. Both measures would be envisioned for those companies that maintain their payroll, in such a way that employment is protected.

- Relief in the cost of credit. Actions are being taken to improve credit conditions for Costa Rican households and businesses. In particular:

• The Board of Directors of the Central Bank will assess the possibility of an additional monetary stimulus to further push down interest rates.
• CONASSIF will consider temporary adjustments to prudential regulations in order to expand the space for credit readjustment, so that banks can reduce credit service fees for their debtors.
• CONASSIF will also evaluate the temporary reduction of countercyclical provisions, to allow for a greater expansion of credit in this situation.
• The President of the Republic will instruct the commercial banks of the state to readjust the credits of debtors, including a possible moratorium in the payment of the principal and/or the interests for three months, extendable, in particular for the most affected sectors. 

- Relief from tax obligations. In regard to tax burdens, it is being proposed the postponement in the payment of income taxes, VAT and customs duties of companies and SMEs for a period of three months from the entry into force of the law. The amounts of the taxes corresponding to that period will have to be paid by the taxpayers before December 31, without interest or fines.

• The measures include a 3-month moratorium on the payment of Value Added Tax (VAT), Income Tax and Customs duties for companies, extendable to a fourth month; and the regulation of prices for alcohol gels, liquid disinfectants, spray disinfectants and bar or liquid soaps, disinfectant towels; goods that are indispensable during the emergency. Depending on the impact of the pandemic on the economy, the law would authorize the President of the 
  Republic to extend the moratorium only once for a month. The measure does not exempt taxpayers from any other tax obligation.
• In the case of the tax moratorium, it is proposed that for three months companies can postpone the payment of three taxes, so that they can cancel them on a deferred basis by December 31, without interest or fines.

- Relief in the payment of insurance and special coverage for tourists. The Executive President and the Board of Directors of the National Insurance Institute (INS) will propose to the Superintendent of Insurance:

• A preferential rate for insurance of occupational risks for companies with less than 30 workers. The amount to be paid, as a proportion of the full premium, would be applied as follows 40% in year 1, 60% in year 2 and 75% as from year 3
• A new definition so that the occupational hazard claims that may arise from covid-19 are not attributed to individual companies but to the entire line.
• A new insurance product to help the tourism sector cope with the contingencies caused by covid-19. It is a quarantine insurance for tourists coming to the country.

5. “Protect" Plan: financial support for government actions to address covid-19

The Government of the Republic activates the "Plan PROTEGER" that reaches the amount of ₡1 billion with the objective of attending the consequences of the covid-19, by means of which it is sought to protect the people, the works and the companies, informed the President of the Republic, Carlos Alvarado Quesada.

- The plan aims to accumulate liquidity. To react responsibly to the needs and according to the evolution of the emergency.

• The amount is equivalent to 3% of the Gross Domestic Product (GDP) and seeks to protect people, jobs and companies.
• The plan targets to accumulate liquidity to react responsibly to the needs and according to the evolution of the emergency.
• The resources come from the project PAGAR, CAF, social contribution of luxury pensions, project of securitization of profits of the INS and IDB-AFD loan.

These resources represent 3% of the Domestic Product (GDP) and come from the project "Pagar Law" (₡226 billion), the Latin American Development Bank (CAF) (₡287 billion), solidarity contribution of luxury pensions (₡12 billion), the loan of the Inter-American Development Bank (IDB)-French Development Agency (AFD) (₡216 billion) and the project of securitization of profits of the National Insurance Institute (INS) (₡288 billion).

The president indicated that the members of the economic team of the government are working on the promotion of a series of projects in the legislative agenda and extended a patriotic thanks to the deputies who have been willing to meet from Friday to Sunday to carry out the actions. "We have the liquidity to finance a series of measures that would have the fundamental objective of protecting people, jobs and companies. These resources give us the necessary protection as a country to be able to deal with this social and economic emergency, which is why we are asking the deputies for their support", said the president, while expressing his administration's willingness to work as a team for the country.

Today, March 22, 2020, there are 134 reported cases of covid-19 infection in Costa Rica. The statistics include two fatalities, both 87-year-old male patients. The first to die, on Wednesday, March 18, was a retired doctor, who also suffered from hypertension and was a resident of Alajuela. On the night of Thursday, March 19, the Ministry of Health confirmed the second death.

Readings consulted:

- BBC News World - March 17, 2020. Coronavirus: the collapse of the Chinese economy by the coronavirus (and why it is a "great threat" to the world): https://www.bbc.com/mundo/noticias-internacional

- Medium.com. 10 de marzo 2020. Tomas Pueyo. Coronavirus: Why you must act now: medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca

- The Nation. March 13, 2020. Alberto Trejos. Economist: Main Impacts of COVID -19 will be felt in tourism, entertainment, raw materials and education: https://www.nacion.com/economia/politica-economica/alberto-trejos-economista-principales impacts/BOCMOH7ZNVA6RMZAQBAHTX7NCM/story/

- The Nation. March 18, 2020. Chambers fear collapse due to lower consumption and export closure: https://www.nacion.com/economia/negocios/sector-privado-teme-colapso-en-empresas-por-menor/MMEC2YJM5NHRXJDBYPSBQKKRBA/story/

- The Nation. March 10, 2020. Virus cools down the country's exports and imports:https://lanacioncostarica.pressreader.com/la-nacion-costa-rica/20200310/textview

- The Nation. March 17, 2020. Hotels report more than 10,000 cancelled nights: https://lanacioncostarica.pressreader.com/la-nacion-costa-rica/20200317/textview

- The Nation. March 18, 2020. Approved postponement of payment of four taxes: https://lanacioncostarica.pressreader.com/la-nacion-costa-rica/20200318/textview

- Presidential House. Communiqués. March 14, 2020. Government presents measures to protect workers and companies from the economic effects of covid-19: https://www.presidencia.go.cr/comunicados/2020/03/gobierno-presenta-medidas-para-proteger-trabajadores-y-empresas-ante-los-efectos-economicos-del-covid-19/

- The Nation. March 15th, 2020. EDITORIAL, PAGE 16. The global impact of covid-19: https://lanacioncostarica.pressreader.com/la-nacion-costa-rica/20200315

- Delfino.cr. 14 March 2020.Government announces 5 economic counter measures 19: tax moratorium and price regulation: https://delfino.cr/2020/03/gobierno-anuncia-5-medidas-economicas-contra-covid-19-moratoria-de-impuestos-y-regulacion-de-previos

- Communiqué Presidential House. March 19, 2020. Government launches 1 billion colones Plan Proteger to address consequences of covid-19: https://www.presidencia.go.cr/comunicados/2020/03/gobierno-acciona-plan-proteger-de-1-billon-de-colones-para-atender-consecuencias-del-covid-19/

- The Nation. March 20, 2020. Last night: Covid-19 kills another 87-year-old man: https://lanacioncostarica.pressreader.com/la-nacion-costa-rica/20200320/textview

- Crhoy.com. 20 March 2020. Health confirms 113 cases of COVID-19: https://www.crhoy.com/nacionales/salud-confirma-113-casos-de-covid-19/?utm_source=webPushNotification&utm_medium=ultimaHora&utm_campaign=ultimaHora