In Brazil, populist far-right president Jair Bolsonaro dismissed Covid-19 as media ‘hysteria’ and just ‘a little flu’, while Mexico’s leftist president Andres Manuel Lopez Obrador initially downplayed the risks, urging Mexicans to continue embracing each other and eating out at restaurants. As recently as mid-March, he was still attending political rallies and hugging and kissing supporters. At a news conference a few days later, he took out his wallet and showed off the religious amulets that he claims will shield him from the virus. It was not until later in March that Mexico started taking the pandemic more seriously, imposing social distancing measures, banning large gatherings and ordering non-essential businesses to close. In Brazil, however, Bolsonaro has continued to resist calls for stricter lockdown measures, forcing state governors to take matters into their own hands. Sao Paulo governor Joao Doria, for instance, ordered a statewide shutdown of non-essential businesses in late March. Political infighting within Bolsonaro’s own cabinet has also hampered efforts to tackle the pandemic. His justice minister and anti-corruption figurehead Sergio Moro resigned in April, accusing Bolsonaro of political interference. And by mid-May he had also lost two health ministers: Luiz Henrique Mandetta, who was sacked after advising people to stay indoors and follow social distancing guidelines, and Nelson Teich, who quit after just four weeks in the job. By neglecting public health and putting the economy first, Bolsonaro has “made the wrong gamble,” said Jan Dehn, head of research at emerging markets asset manager Ashmore. “That has put him in the same camp as Russia, Britain and the US, and all of those countries have one thing in common - they are all right-wing populist governments,” Dehn said. “All of those countries opted initially not to engage in full-blown lockdowns, and that was really a question of values: do I want good economic performance or do I want to protect individuals? That was the choice, and it’s backfired for Bolsonaro.” By mid-May, there were almost 17,000 coronavirus-related deaths in Brazil, putting it behind only the US, the UK, Italy, Spain and France. In Mexico, where testing is the lowest among OECD countries, Covid-related deaths stood at roughly 5,000. The economic response has also been mixed. While Brazil has ramped up spending in an attempt to cushion the blow, Lopez Obrador has refused to relax his fiscal thriftiness - a decision that economists reckon will cause an even sharper slowdown. We see a 9% contraction of GDP this year and that has a downward bias, so it could be even worse,” said Ernesto Revilla, chief Latin America economist at Citigroup. “The government has done very little to smooth out the shock, if you look at both monetary and fiscal policy, both are still tight when they should be stimulative. Mexico’s central bank cut its policy rate by 50bp to 5.5% on May 14 but remains relatively hawkish compared to other rate-setters in the region. Brazil, by contrast, slashed its interest rate by 75bp to 3% in early May, a larger pruning than many market-watchers expected. In terms of fiscal policy, the comparison with other emerging markets is even more dramatic because the [Mexican] government has opposed any support to the private sector,” Revilla said. “The government says it doesn’t want to bail out the private sector but paradoxically that would make for a deeper downturn that would be harder to get out of.” Even bond investors, who usually break into cold sweats at the merest hint of fiscal loosening, are perplexed by the relative inaction. “It’s a bit difficult to understand the reasons; they decided to stay on the fiscal prudence side which is probably not the right decision,” said Viktor Szabo, investment director at Aberdeen Standard Investment
