Guest Contribution: “The impact of the pandemic on developing countries”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers.  A shorter version appeared in Project Syndicate.

The covid-19 pandemic has had differentiated impacts across countries. This is true even among the set of Emerging Market and Developing Economies (EMDEs), which share the disadvantages of more poverty, less adequate health care, and fewer jobs that can be done remotely, compared to Advanced Economies.

Differentiation across continents

Surprisingly, the rates of infection and death have so far been lower in most EMDEs than in the US and Europe, as pointed out by Pinelopi Goldberg and Tristan Reed, and by Raghuram  Rajan. Undercounting is undoubtedly massive, however. Furthermore, the situation is evolving rapidly.

Across continents, health in Latin America has been the hardest hit in general among EMDEs.  Southeast Asia has been the least affected; for example, Vietnam and Thailand report extraordinarily few cases.

Why has the coronavirus hit Latin America so hard?  Obvious possible reasons include the region’s inequality, large densely populated cities, many workers in the informal sector, inadequate public health systems, and many internal migrants (a problem that also looms large in India).  A less obvious factor is that Latin America — like North America and Europe — had had less experience with pandemics in recent decades, as compared to East Asia or Africa, where SARS and Ebola made people more familiar with the dangers, and the consequent need for social distancing.

The situation in sub-Saharan Africa is unclear. On the one hand, the numbers of cases and deaths have been relatively low, at least up to now.  The young population may help explain this.  On the other hand, testing is probably even more inadequate here than elsewhere and the situation is worsening rapidly in South Africa.  Apparently hotspots start in major metropolises with busy international airports – think Milan, London, New York, and now Johannesburg — and then inevitably spread out to neighboring regions with a lag.

 Differentiation within Latin America

There is also differentiation of the impact within continents. In Latin America, Brazil and Mexico are suffering especially badly.  Brazil ranks #2 in the world, in absolute numbers of reported cases and deaths, after the United States.   Uruguay is apparently doing the best.  It is not that Uruguay is following the Trump philosophy and reporting few cases by means of few tests; it has a low rate of positive results per test, which is the more meaningful statistic.

There is a ready explanation for why Brazil and Mexico are suffering such high rates of infection and mortality: poor political leadership.  Their presidents are following the strategy that Trump has pioneered since the start:  denying the seriousness of the situation and visibly undermining experts’ recommended responses such as campaigns to get people to wear masks.  (Nicaragua probably belongs on this list of ostrich-leaders, but test numbers are unavailable.)

Then there is the case of Peru.  It is hard to say what the government has done wrong, and yet reported cases and deaths per capita are worse than Brazil and almost as bad as the U.S.  Similarly, one can’t explain why Chile reports more cases per capita than virtually any country.

Economic impact

The economic impact of the pandemic shock is worse in EM and Developing Economies than in advanced economies.  Besides the direct health impact, including lockdowns as in advanced countries, they have lost major sources of foreign exchange:  export revenue (especially in the case of oil exporters), tourism, and remittances from emigrants.  In March, global investors pulled out of emerging markets, in a switch to risk-off attitudes in financial markets generally.   Subsequently, as tremendous stimulus by the Fed restored investors’ reach for yield, capital flows returned to some countries. The current easy conditions in global financial markets mean that the much-invoked “perfect storm” analogy does not quite apply.  But the situation facing EMDEs is bad enough as it is. Moreover, the current risk-tolerance in financial markets may not hold up.

The US and other advanced countries have been able to respond to the coronavirus recession with massive domestic government spending. EMDEs, in contrast, lack the fiscal space to respond with big spending programs, even for public health and support for hard-hit households, let alone for general macroeconomic stimulus.  (The US can get away with running record deficits, not because it has been prudent in the past – it hasn’t – but because of its “exorbitant privilege”: investors everywhere are happy to hold dollars and US treasury bills.)

Some debtors, including Argentina, Ecuador, Lebanon, Nigeria, and Venezuela, already had severe debt troubles even before the pandemic, and have had to restructure their debts or default.  Some others like Peru entered 2020 with relatively strong debt and reserve positions (due to prudent policies put in place when mineral prices were high), and yet have been badly hit by both the pandemic and the global recession nonetheless.

The G20 moratorium and what it leaves out

In recognition of acute financing constraints, the G20 in April offered to suspend bilateral official debt payments for the year, for the world’s 73 poorest countries.  But this step falls short in four different ways.

  1. Suspension is of course not the same as debt forgiveness. There is little reason to think that the situation will be better at the end of the year. Further debt restructuring will be needed in some cases.
  2. It is very unclear to what extent China will participate among the creditors offering relief. This matters a lot.  As Carmen Reinhart and co-authors have uncovered, China is not merely the largest official creditor; its outstanding claims surpass “the loan books of the IMF, World Bank and of all other 22 Paris Club governments combined.”
  3. The G20 moratorium also doesn’t include private creditors. Indeed, many debtors are showing themselves reluctant to take up the G-20 suspension offer for fear that downgrading would lose them access to private capital markets. In past debt crises, the international community (there used to be such a thing), asked the private sector to participate simultaneously with the IMF and rich-country governments:  Rescue packages associated with IMF programs took steps so that the foreign exchange freed up by new public loans to the debtor country, conditional on sacrifices by its population, did not just go to paying off private creditors.  In 1990s currency crises, it was called Private Sector Involvement.  Similarly, in the 1982 international debt crisis, rich-country banks were “bailed in” to the rescue effort rather than being “bailed out.”  Where restructuring is necessary, private creditors should do their share.
  4. The G-20 moratorium doesn’t extend to middle-income countries. But some of them will need accommodation too.


What else is to be done?  EMDEs need to be able to export to the rest of the world, to restore growth and to earn the foreign exchange to service their international debts.  But global trade has collapsed. The twin reasons are the worst tariff war since the 1930s followed by the worst global recession since the 1930s.  The whole world is paying a cost for an absence of political leadership and a virtual breakdown in the multi-lateral order.


This post written by Jeffrey Frankel.

20 thoughts on “Guest Contribution: “The impact of the pandemic on developing countries”

  1. Moses Herzog

    It kind of reminds one of the “mortgage relief” and “rent relief” offered by U.S. Congressional law during to COVID-19 pandemic in America. If the property bills are still accruing/accumulating during that time, and are due very soon after the “relief” (after an extended time of no employment/salary) exactly what “good” has that “relief” done anyone?? Properties can and will be foreclosed on, claimed, and people can be evicted from their apartments.

    It also reminds me of the HARP program. A program which was nice for headlines and to pacify people in the moment. But in the end, compared to what could have been done by court remedied mortgage cramdowns, what exactly was achieved by HARP?? I guess it saved President Obama from getting his lazy butt out there across America’s heartland to stump for the cramdowns, and saved President Obama from making enemies of the TBTF banks, who would no doubt come to his “charity and goodwill cause” aid (i.e. Obama Foundation funding) in his post-Presidency.

  2. 2slugbaits

    What else is to be done?

    For starters the developed world should freely offer vaccines to less developed countries. It’s in our interests as well as the interests of those less developed countries. Figuring out how we get vaccines to some of the world’s hellholes ought to be getting more attention than it’s been getting.

      1. 2slugbaits

        I don’t expect private companies to offer vaccines for free. At a minimum they should be able to recover their research costs plus production costs plus a fair rate of return. I believe it’s taxpayers who should foot the bill. It’s in our long term self-interest.

        1. Moses Herzog

          Oxford is a public University last time I checked. And a large amount of the research for this stuff (drugs in general) has been publicly funded. I think people would be amazed to know the amount of university guys who work on grants etc, then when they make the discovery break off from their university commitments and make their “FU money”. It happens much more than people realize.

          There’s been lots of whining about government funding for antibiotics lately. We pay for the research then pay for the pills/vaccines. We’re paying on BOTH ends. If they want to abscond with the money then let the banks pay for it or extend them loans. This crap of paying on both ends, you know what?? I’ll wear a double-layered mask and wash my hands and they can go to hell. They can’t have it both ways,

          1. Moses Herzog

            If I wanted to be a jerk about it I could insist it still qualifies as a public university as it still gets a small percentage of government funding. But you’ve made a fair point. I would say “quasi”, leaning towards private. I will wave the white flag on this one. My mistake.

  3. Moses Herzog

    My Dad had a dry sense of humor. I grew up with a minute set of interests, watching David Letterman at midnight (when he was on NBC, his best years) and never getting the proper amount of sleep, and then (branching off from my interest in Letterman) learning about Ernie Kovacs. Anywayz….. to make a short story long, I’ve always found dry humor to be the most enjoyable and the type of humor I treasure. This local journalist has made me chuckle to myself staring at a computer monitor probably as much as anyone has outside of maybe Colbert the last 5 years:

    If you’re on twitter and not following this guy, you’re doing it wrong.

  4. ltr

    “Figuring out how we get vaccines to some of the world’s hellholes…”

    Donald Trump has been starkly influential is encouraging people to think about and refer to other countries in racist stereotypes.

    What was the racist term Trump used to describe African and other countries? I prefer to forget, but I am sure it rhymes with the horrid term used here.

    1. 2slugbaits

      ltr I had in mind some of the many war zones. Any ideas how you get vaccines to refugees in Syria? Or Libya? Or any of the various Godforsakenistans? I have a family member who coordinated the US response to the Ebola outbreak from the Ivory Coast. That was plenty difficult, but this would be far worse.

  5. ltr

    I appreciate the response and your concern which is important. As for the specific question, a Chinese vaccine when there is one will be a “public good.” Chinese production facilities are being built and certified, and vaccine will surely be made available in Africa and for members of the Shanghai Cooperation Organisation, which means Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Pakistan… Obviously the undertaking will be monumental.

    The Chinese have already been assisting SCO members and African states, and will continue.

    I admire your family member and appreciate the telling.

    1. Moses Herzog

      Hey, do you happen to know who sponsors “CGTN”??

      For those of you who don’t know, “CGTN” is China’s version. of Russia’s “RT”.

  6. ltr

    Hey, do you happen to know who sponsors “CGTN”??

    [ I am uninterested in and offended by writing that is meant to frighten and intimidate. I am uninterested in racist writing. I suggest counseling. ]

  7. ltr

    The current spread of coronavirus infections through South America and South Africa, below the equator, is evident and should be concerning.  Chinese specialists have suggested that there is a seasonal aspect to the coronavirus, and these are the winter months in the southern hemisphere.  Australia is experiencing a spread of infections as well.

    There is as well a new spread of infections in Europe and Japan and Israel, where openings of businesses and schools may have been too incautious.

  8. ltr

    An aside or addition:

    August 6, 2020



    Cases   ( 5,018,083)
    Deaths   ( 162,508)

    Deaths per million ( 491)

    The astonishing, sad data appears to be telling us that we have a serious institutional healthcare problem, but other than by a Branko Milanovic or Dean Baker such a possible problem seems yet seldom to have been considered by economists.

  9. ltr

    Lots of economists have written on healthcare issues…

    [ No, assuredly not from the perspective of a troubled institution which we apparently have. But this is not at all a criticism, simply an observation. No need to be at all defensive.

    I need to practice being less obviously assertive. ]

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