How the pandemic has impacted the world’s most vulnerable populations in low- and middle-income economies

 Freetown, Sierra Leone
In Sierra Leone, 87% of rural households reported food insecurity, nearly double the median value.

  • Northwestern researchers asked 30,000 people on three continents how the pandemic affected them.
  • Households reported drops in income, as well as increases in food insecurity, and little support.
  • One of the most promising tactics for moving past the pandemic’s effects is mobile money transfers.
  • See more stories on Insider’s business page.

The COVID-19 crisis has been devastating for much of the global economy. Yet while the effects on established markets have been well-documented, less is known about the pandemic’s impacts on low- and middle-income countries, which account for the majority of the world’s population. This is partly because official statistics generally fail to capture the impact on informal markets, such as street-vendor sales, in which large sections of those economies participate.

So Kellogg finance professor Dean Karlan and Northwestern professor of economics Chris Udry, along with more than 20 collaborators, set out to measure the pandemic’s economic impact in low- and middle-income countries.

“These are the world’s most vulnerable people,” said Karlan, who along with Udry codirects Kellogg’s Global Poverty Research Lab. “The level of vulnerability is just fundamentally different in developing countries versus US and Europe, where even if someone is really low-income, they’re still better off than the poorest of the poor in developing countries, where the safety nets simply aren’t as strong.”

Read more: How to make sense of the COVID economic crisis, explained by a former US Treasury official

“We wanted to know the effect of the pandemic, and government policies to combat it, on individuals who rely on informal markets to sustain themselves and don’t have access to formal support mechanisms like social security or unemployment insurance,” Udry said.

Based on a phone survey of more than 30,000 people on three continents, the researchers found the pandemic’s impacts on developing regions to be deep, widespread, and negative: households across geographies and economic status reported significant drops in income and employment, as well as increases in food insecurity. And, crucially, few of these households reported receiving any kind of financial support.

As the authors write, for low- and middle-income countries, “the economic crisis precipitated by COVID-19 may become as much a public health and societal disaster as the pandemic itself.”

A global phone survey

While it’s not their normal method of data gathering, the researchers landed on a phone survey as the best method to use in a pandemic.

“It was like, ‘You want some data? This is the only way you can get it,'” Karlan said.

The method introduced a number of challenges for the researchers.

“We had to learn very quickly about how to conduct surveys by phone. You lose the trust and comfort that a face-to-face conversation engenders,” said Karlan.

To mitigate that loss, the researchers partnered with Innovations for Poverty Action to recruit local interviewers in each country, and took care to match languages, dialects, and accents between interviewers and respondents.

Another challenge: not everyone owns, or can easily borrow, a phone. “It meant we weren’t able to reach people without access to mobile phones,” Udry said. “That’s a whole set of vulnerable people we can’t get to until we’re able to go in person again.”

Due to this limitation, the study’s results likely represent a “best-case” scenario, as the interviews didn’t include those at the economic pyramid’s very bottom.

Ultimately the researchers conducted 16 surveys that were statistically representative of households in nine countries across Africa (Burkina Faso, Ghana, Kenya, Rwanda, Sierra Leone), Asia (Bangladesh, Nepal, Philippines), and Latin America (Colombia), starting in April 2020. Most of the surveys were coordinated by Innovations for Poverty Action.

In total, they surveyed 30,000 people living in both urban and rural areas, as well as in or near refugee camps. The researchers asked about changes in employment, income, food insecurity, access to markets (such as for purchasing groceries), receipt of government support, and domestic violence.

Bad news across the board

The study found that the negative impacts of the pandemic on developing regions are large and broad.

For example, income dropped for households in all settings during the pandemic. Across the 16 surveys, the median share of households that reported an income drop was a “staggering 70%,” the authors write, compared with a median of 7% reporting an income increase. The median share of households that experienced job loss was 30%.

In general, similar proportions of households across all socioeconomic levels reported drops in income and employment.

Moreover, the median share of households that reported food insecurity was 45%, with wide variability within and between countries. In Sierra Leone, for example, 87% of rural households reported food insecurity, nearly double the median value.

The crisis may have also contributed to increased domestic violence. In Kenya, for example, violence against women and children rose 4% and 13%, respectively, during the early months of the pandemic.

And, for the most part, people were on their own to weather the storm. Overall, the median share of households receiving government or NGO crisis support was only 11%.

The authors note that the scale of disruption seems to eclipse those of other global crises like the 2008 Great Recession and the 2014 Ebola outbreak. “The biggest take-home for me is the spread of the effect,” Udry said. “I expected the effects to be serious but didn’t realize it was going to reach almost everyone.”

“What we found makes clear the kind of calamity low-income households in developing countries are facing,” Karlan agreed.

To make matters worse, if other historical events are any guide, COVID’s impact will be long-reaching. For example, children in the US born soon after the 1918 influenza pandemic experienced lifelong declines in education and earnings compared with baseline expectations.

“One of the main messages of modern economics is that even relatively short-run shocks can have long-term effects,” Udry said. “Long after the pandemic is gone, there are likely consequences for the growth of kids’ knowledge and declines in the asset holdings of the poor.”

The impact, unfortunately, is likely to be felt for generations.

The best way forward

The research also points to policies that could help address the pandemic’s dire economic impacts – and mitigate the effects of future crises.

One of the most promising tactics is mobile money transfers from the government or NGOs, which are fast and require no risky face-to-face transaction. “We can reach a lot of people quickly with these innovative payment mechanisms,” Udry said.

Indeed, Karlan and Udry worked on this type of transfer with the government of Togo during the pandemic.

“We’ve helped them rapid-fire implement a targeted program of cash transfers to low-income households that were in the informal market,” Karlan said. “Now we’re helping the government use cell-phone data to refine and improve targeting methods, to help find low-income households and transfer them cash.” They’re exploring expansion of the strategy to Nigeria and Bangladesh.

Furthermore, the researchers say, governments and NGOs must build robust social support systems – with short-term components like Togo’s cash-transfer system and longer-term ones like skills training programs – to anticipate the next pandemic or economic crisis.

Granted, this wouldn’t be easy for the already cash-strapped governments of the countries studied here. But richer countries have an important role to play, partly for humanitarian reasons, but also because “disease transmission does not respect national borders,” as the authors write.

“We need some multinational players, like the World Bank, to help establish the methods, procedures, and technical knowledge for doing this,” Karlan said.

In general, the researchers agree that a more proactive, preventive approach is the right way forward.

“This crisis has been disastrous and widespread, with long-term effects,” Udry said. “We do have mechanisms that can help a lot of people, but we need to strengthen social security systems to provide greater resilience and support in the future. That’s the lesson to learn here.”

Karlan agrees. “We want our work to serve as a call to arms to groups,” Karlan said, “to do things like what Togo has done, to prepare for the next crisis.”

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These countries will get 25 million doses of the COVID-19 vaccine from the US

Covid Vaccine
COVID-19 vaccine

  • The US will send 25 million vaccine doses to countries in Central and South America, Asia and Africa.
  • “This is just the beginning,” White House COVID-19 response coordinator Jeff Zients said.
  • Shipments will take place over the next several weeks.
  • See more stories on Insider’s business page.

The United States will send 25 million excess COVID-19 vaccine doses to countries all over the world, the White House announced Thursday.

Nearly 19 million of the doses will be given through COVAX, the UN-backed global vaccine sharing program that helps vulnerable countries.

In total, 7 million of those doses will be donated to nations in South and Southeast Asia, including India, Nepal, Afghanistan, Philippines, and Vietnam. Another 6 million doses will be shipped across Central and South America, including to Brazil, Honduras, Guatemala, Haiti, and El Salvador. Approximately 5 million doses will be delivered to countries in Africa, coordinated through the African Union.

The remaining 6 million doses will be given directly to allies and countries seeing surges in COVID-19 cases, including Canada, Mexico, South Korea, Egypt, Iraq, and the West Bank and Gaza, the White House said.

“As long as this pandemic is raging anywhere in the world, the American people will still be vulnerable,” President Joe Biden said in a statement. “And the United States is committed to bringing the same urgency to international vaccination efforts that we have demonstrated at home.”

“This is just the beginning,” White House COVID-19 response coordinator Jeff Zients said during a Thursday briefing. The doses will consist of Pfizer, Moderna, and Johnson & Johnson vaccines, Zients confirmed.

Vaccine shipments will take place over the next several weeks. The US plans to share a total of 80 million excess doses with the rest of the world by the end of June – five times the amount any other country has committed to donating, according to the White House.

“A number of those are even going to go out as soon as today,” White House press secretary Jen Psaki said in a news conference Thursday.

The White House reiterated that the US has secured enough supply to fully vaccinate Americans and the doses that will be shipped come from a surplus in the US stockpile.

The announcement comes ahead of Biden’s meeting in the United Kingdom with the Group of Seven nations next week. National Security Advisor Jake Sullivan noted on Thursday that the US plans to work with those countries to help end the pandemic.

“Our goal in sharing our vaccines is in service of ending the pandemic globally,” Sullivan said during a White House coronavirus task force briefing Thursday. “Our overarching aim is to get as many safe and effective vaccines to as many people as fast as possible.”

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American Airlines made a bet on South America for 2021. Civil unrest and spiking COVID-19 cases are now threatening its success in the region.

American Airlines
An American Airlines Boeing 777-300ER.

  • American Airlines is facing numerous setbacks in South America.
  • Rising COVID-19 cases in Chile, Brazil, and Peru forced the airline to cut flights in April.
  • Civil unrest and protests in Colombia are now further threatening success in the region.
  • See more stories on Insider’s business page.

American Airlines’ expansion strategy in South America is experiencing a seemingly never-ending stream of hurdles.

Tourism-dependent Latin America was among the first regions to welcome US tourists during the coronavirus pandemic, and American was standing ready to fly eager travelers. Earlier in the year, the airline had announced new flights to cities in Chile, Colombia, and Brazil in a bid to attract leisure flyers as it waited for business travel to recover.

But while the continent appeared to be welcoming at first, doing business in South America quickly proved problematic.

Flights to Santiago, Chile, were among the first to be impacted when the country closed its borders for the month of April. American had planned to launch a new non-stop route from New York using one of its largest aircraft, the Boeing 777-200, on May 7.

Chile appeared promising when it opened to Americans in November 2020. But a spike in COVID-19 cases following the country’s summer season prompted the government to once again close its borders to tourists.

The state of emergency in the country planned for the month of April has now been extended through June, according to the US Embassy in Chile. American, as a result, pushed back the launch of its inaugural New York-Santiago flight to July 2; though, Chile may extend its border closure depending on conditions in the country.

Spiking COVID-19 cases were also the reasoning for flight reductions to Brazil and Peru, the airline confirmed to Insider’s Brittany Chang in April. Both countries still allow US citizens to enter despite the rise in cases, according to the US Embassies in Brazil and Peru.

In Colombia, however, American faces a new challenge: civil unrest. Protests have gripped the country with some turning violent and taking the lives of at least 26 people, according to ABC News. The Washington Post Editorial Board is also predicting that Colombia’s levels of unrest could spread to regional countries, like Peru.

American, in response, has issued a travel alert for the Colombian city of Cali, where the protests have been the most extreme, allowing travelers to change their flight to any day between May 4 and May 18.

The protests could discourage future travelers from booking trips to Colombia or encourage flyers with existing bookings to change away from Colombia at a time when American is deploying some of its largest aircraft to the country.

Rebuilding a lost South American network at the wrong time

American’s desire to grow in South American comes as the airline seeks to rebuild following the loss of a partner in LATAM Airlines prior to the pandemic.

Delta Air Lines spent $1.9 billion in 2019 for a 20 percent stake in LATAM, significantly growing its presence in South America. The move saw LATAM drop American and the Oneworld airline alliance to join Delta and the SkyTeam airline alliance, leaving American to rebuild in a historically profitable region.

“Latin America has, for roughly 30 years now, been one of American’s international beachhead,” Henry Harteveldt, travel analyst and cofounder of Atmosphere Research Group, told Insider. “In fact, it’s been American’s most successful region outside of the US.”

With LATAM gone, American was left with Brazil’s GOL Linhas Aéreas, a limited partner in the region. But GOL didn’t have the reach of the larger airlines that were now aligned with American’s competitors.

Delta bought a new partner in LATAM Airlines alongside its existing partner in Aerolíneas Argentinas while United had Avianca and Copa Airlines. To regrow its South American network, American chose to launch new routes from the US with a domestic partner, JetBlue Airways.

American launched its routes to Colombia, Brazil, and Chile in a partnership with JetBlue dubbed the “Northeast Alliance.” For American, the partnership provides access to customers across JetBlue’s network that can connect onto the new routes.

“It’s understandable that American would be eager to start rebuilding its network in Latin America because it is so strategically important to the airline right now,” Harteveldt said.

Ceding Europe to United and Delta, for now

South America isn’t totally lost for American as the airline still operates around 30 daily flights to cities across the continent. Cirium data also shows a steady stream of cargo-only flights operating to Santiago from Miami in 2021, which Harteveldt says helps stem the losses.

But while American focuses on South America, its competitors are locked in on the reopening European continent. United and Delta were both quick to resume flights to European countries open to Americans like Greece and Iceland while also starting new routes to Croatia.

“I think American is looking at this and saying, ‘we’re going to be very careful about which routes we pick and which battles want to fight,'” Harteveldt said, thinking back to 2018 when American launched Iceland flights alongside Icelandair now-defunct Wow Air with flights to Dallas. But the airline hasn’t completely ignored Europe, nor a gradually reopening Middle East.

A new route between New York and Athens, Greece, is scheduled to launch on June 2 and existing routes to Athens from Chicago and Philadelphia will resume in June and August, respectively. The airline also just launched a new route between New York and Tel Aviv, Israel, with plans for another route to Israel from Miami, which may pay off as the Middle Eastern country starts to accept vaccinated tour groups.

American may also be waiting for the European Union to open its doors to US citizens, Harteveldt says, so the airline can fly more passengers on its traditional routes to cities like Paris, France; Madrid, Spain; and Rome, Italy.

But success in South America remains challenging as new and unexpected roadblocks appear that are outside of the airline’s control.

“It’s not American’s fault, for example, that you had a strong surge of virus in a particular country, Harteveldt said. “It’s not American’s fault that travel restrictions are in place when American may have thought that some of these restrictions would have been eased or removed.”

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