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COVID-19 Fact base
and potential implications
for Brazil
June 26th, 2020
Copyright @ 2020 Bain & Company. All rights reserved.
Any use of this material without specific permission of Bain & Company is strictly prohibited
2Bain&Co - COVID19 Brazil POV - ...SAO
Copyright @ 2020 Bain & Company. All rights reserved.
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Context for these materials
• COVID-19 is a humanitarian crisis and a global challenge. In this interconnected world, we have seen the virus spread
rapidly, and we are still gathering information to understand both its origins and its impact
• We are grateful for the businesses, governments, non-profits, and individuals around the world that are working to
protect those that are sick or in danger of becoming so, and to “flatten the curve”
• There is a lot that is still unknown about COVID-19; these materials are an attempt to shed light on what we know so
far to help businesses make informed decisions
– The top priority for all businesses is to protect the safety and health of employees and customers, for which there are WHO, CDC, and
other national guidelines
– Bain is not an expert on epidemiology and containment policies, however, given our 45+ years of experience advising companies during both
economic booms and busts, we are committed to spreading accurate and timely information to reduce the unknowns for businesses
and business leaders
• Our focus is to enable companies to make rapid and practical decisions; with a global pandemic that is rapidly
spreading and changing, now is not the time for detailed decision making; the need for speed and the right directional
strategy outweighs the need to get intricate details right, and we are committed to helping business leaders navigate the
path forward
3Bain&Co - COVID19 Brazil POV - ...SAO
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Global landscape and implications for Brazil:
A different progression story
• It is clear by now that South American countries will not follow the same trajectory (the bell-shaped curve) of most
Asian or European countries
– Even after more than 80 days of restriction measures, the peak does not seem to have been reached even under high mobility reduction (e.g.
Colombia, Peru and Argentina)
• Countries adopted different strategies to control the contagiousness level (R0); different combinations of favorable
demographics, the widespread use of technology/testing and harsh suppression measures were needed to take the
R0 below 1 and slowdown the curve
– Although there were some correct measures in places like early mobility restriction and even good testing levels in a few countries (e.g.
Colombia and Chile), this was not enough to compensate that higher starting R0
– Besides, not all mobility is the same, while in Europe people that needed to move was using their cars or even bikes, in South America the
mobility was in crowded buses and for longer distances
– Lastly, South American countries didn’t use technology in their favor – low/average testing levels, no use of tracing and no use of target
quarantine policies
• In summary, to compensate for the higher R0 starting point, South America should have used more weapons to
control the virus
– Brazil, in particular, has always had low testing levels, not enough mobility reduction in the high dense areas and no use of tracing
technologies
What is the current situation and outlook for Brazil?
G L O B A L L A N D S C A P E
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Brazil
What we expected… and what we see now
What we expected... ...and what we see now
• A long plateau of the disease would be maintained over the
following 4-8 weeks at least, driven by states in multiple stages of
the spread
• The epidemiological perspective of a "long plateau scenario”,
driven by states balancing the disease spread and the
economy, has materialized for Brazil as a whole during the past
month and continues to be our most likely scenario
• The plateau has been driven by the different stages in which Brazilian
states find themselves, both in terms of the disease spread and in terms
of government actions
• The “shape of the curve” for each state would be driven
mostly by government actions, in order to balance the
healthcare system capacity vs the economy reopening
– As the disease progressed, we expected most states to trend towards
a “control zone”, with R0 ≈ 1 and ICU occupancy ≈ 60-70%
• Most states (14-18) have converged to the “control zone” in
the past 30 days, reaching R0 ≈ 1 and ICU occupancy ≈ 60-70%
– Most states that were in the medium/high risk areas improved and
progressed towards a “control zone” with suppression and immunity
– States that controlled contamination at a first stage started to release
measures and saw an increase in # of cases
– Only very few states that were in the low or medium risk zone "lost
control" for different reasons and advanced to the high risk zone
• We saw no evidence that more robust mitigation plans would
be put into place, making it very hard for states to control the
spread of the disease after lifting restrictions
– Reaching enough exposure immunity seemed to be the only feasible
way to get to a more controlled level of spread
• States that were heavily impacted in the beginning (AM, PA,
CE, MA) are the only ones to have managed to reduce
contamination considerably without major changes on
suppression and mitigation policies; their exposure immunity
level of ~20% is likely playing a major role in their situation
– There are still no clear signs that robust mitigation plans are “in-the
works” to help with reopening economies
B R A Z I L I A N P E R S P E C T I V E
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The SARS hospitalizations metric shows that Brazil remains on a plateau of the disease; after a
drop in weeks 21-22, week 23 (incomplete) already shows numbers trending up again
Source: Fiocruz, Ministry of Health
Epidemiological
Week
Hospitalizations due to SARS per epidemiological week
(k# cases; week of the beginning of symptoms)
A S O F J U N E 2 3
Weeks that
are likely still
considerably
incomplete
on the
reports
Estimated curve
June-11
First wave of exponential growth -
Concentrated in the state capitals initially
more impacted (e.g. SP, RJ, CE, AM, MA, PA)
Increase of contamination due to virus
spread to other capitals, the
countryside and smaller cities
Long plateau - Growth in states that were
spared during initial wave (e.g. MG, RS, PR,
SC, MT, DF) combined with improving conditions
in more severely impacted regions
B R A Z I L I A N P E R S P E C T I V E C O N T A M I N A T I O N C U R V E
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Epidemiological status by state on May 25th: As the disease progressed, we expected
most states would trend towards a “control zone”, with R0 ≈ 1 and ICU occupancy ≈ 60-70%
Contamination R0
ICU average occupancy ratio
GrowingSlowingDown
Low Risk Medium Risk High Risk
Note: ICU occupancy in the state of Minas Gerais on May 25 updated from COVID-19 ICU occupancy to general ICU occupancy, a measure that the state started to adopt in the last few days; R0 calculated as the ratio of average new deaths in the last 7
days to the previous 7 days
Source: Ministry of Health and State Health Departments
State position on May 25th
A S O F M A Y 2 5
States with high ICU occupancy are at high risk of a health care system
collapse and need to keep the R0 (contagiousness level) consistently
below 1 so they can achieve a “sustainable” contamination stage
B R A Z I L I A N P E R S P E C T I V E P R E V I O U S S T A T U S
As states try to balance suppression/mitigation measures to
control the disease with a controlled reopening of economies,
we will likely see this “control zone” as a balancing point, with
stable growth of cases and ICU occupancy under control
7Bain&Co - COVID19 Brazil POV - ...SAO
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Current situation in Brazil: most states are now classified as medium risk and we
expect states to continue orbiting around the “control zone” over the following weeks
0.806545 1.272405 99.6777 11.11
Contamination R0
ICU average occupancy ratio
Note: R0 calculated as the ratio of average new deaths in the last 7 days to the previous 7 days
Source: Ministry of Health and State Health Departments
Low Risk Medium Risk High Risk
GrowingSlowingDown
A S O F J U N E 2 6
As states try to balance suppression/mitigation measures to
control the disease with a controlled reopening of economies,
we will likely see this “control zone” as a balancing point, with
stable growth of cases and ICU occupancy under control
States with high ICU occupancy are at high risk of a health care system
collapse and need to keep the R0 (contagiousness level) consistently
below 1 so they can achieve a “sustainable” contamination stage
B R A Z I L I A N P E R S P E C T I V E C U R R E N T S T A T U S
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Going forward: The upcoming scenario will vary by state or even micro-regions, but
scenario 2 is the most likely to be the norm, until immunity is reached
B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O
Health System capacity
Scenario 1 – relaxing suppression
Estimated hospitalizations due to COVID-19
(# cases)
Epidemiological Week
• Strong peak of contamination
with little response, leading to
exponential case growth
• Probable Collapse of the
healthcare system
Current hospitalizations
Scenario 2 – opening and closing
Health System capacity
Estimated hospitalizations due to COVID-19
(# cases)
Epidemiological Week
Current hospitalizations
• Continuous cycles of suppression to control R0
followed by easing of measures and R0 increase
• Staggered curves of BR states lead to plateau
• Healthcare is kept under stress during a
significant period, and contamination only starts to
slowdown due to exposure immunity
Scenario 3 – robust mitigation plan
Health System capacity
Estimated hospitalizations due to COVID-19
(# cases)
Epidemiological Week
• Suppression measures are
efficient and slowdown the curve in
the next few weeks
• Mitigation strategy is put in place
and mobility reduction measures are
lifted without new surges
Current hospitalizations
Most likely to be the norm
I L L U S T R A T I V E
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Going forward: In fact, we already see signs that scenario 2 - “opening and closing”
– is the most likely for Brazil, with states struggling to reopen the economy
News reports in the past 15 days have filled-up with headlines about cases picking up and distancing measures being
reinforced after many states started to open up their economies
B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O
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Going forward: Combining effects from all States, the most likely scenario for Brazil
is a long plateau of the disease until exposure immunity starts to play a role
Estimated hospitalizations due to COVID-191
(# cases; epidemiological week of the beginning of symptoms) Projections
Epidemiological Week
Note: (1) With SARS Pneumonia symptoms; Source: Brazilian Ministry of Health – Public Health Emergency Operations Center; Bain Estimate.
Healthcare
system capacity
Different stages of COVID-19
spread and government responses
across Brazilian state should
generate a long plateu in the curve
After a significant period, exposure
immunity should help states
reduce the spread more
consistently
B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O
With many states reopening their
economies, we will likely continue
to see cases go up and down for
the following weeks
11Bain&Co - COVID19 Brazil POV - ...SAO
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Manufacture
Transport. &
Storage
Commerce
Economic impact: COVID-19 crisis will hit all sectors at different levels; while agriculture
still has a positive GPD forecast vs 2019, most industries & services will be severely hit
Legend
Note: 1Baseline projection on Feb/20; 2Projection on June/20; 32018 growth vs 2020 Post-COVID projection
Source: LCA GDP Growth projections; WTTC; FGV
2020 GDP growth projection before COVID-191
2020 GDP growth projection after COVID-192
ConstructionTourism3
Agriculture
Industries Services
Financial
Services
Real Estate Public. Adm
High Impact Medium Impact Low Impact
Energy &
Water
Agriculture
Taxes
Other
Services
Information
Services
A S O F J U N E 2 6
Mineral
Extraction
B R A Z I L I A N P E R S P E C T I V E E C O N O M I C I M P A C T
12Bain&Co - COVID19 Brazil POV - ...SAO
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Global landscape and implications for Brazil:
Lessons from the reopening process
• As government measures are successful and regions are able to control contamination levels, countries are starting to ease restrictions
and mobility starts to return to previous levels. Asian and European countries are moving forward with relaxed quarantine restrictions
while closely monitoring case growth
• Most developed economies are using similar approaches to reopen their countries; they are gradually relaxing suppression measures whilst
strongly reinforcing mitigation actions. There are a few important learnings for South American countries:
– The reopening has been taking place progressively; sectors with low exposure and high economic impact such as industrial and workplaces are prioritized
– On the other hand, there are specific mobility suppression measures being kept: major entertainment events, such as cultural activities and sports events, had
their reopening delayed and borders remain under tight control
– The reopening is usually regionalized and based on a careful risk assessment. The coordination between federal and local governments has been key to
the success of this process; federal governments are responsible to set the strategy and local authorities are responsible for detailing and executing; Transit
between regions of different risk profiles is usually restricted
– Emergency plans have proven to be essential in the case of insurgent new outbreaks; the ability to lock-down cities/neighborhoods goes a long way
– As countries started to reopen they gradually reinforced their mitigation efforts: ramping-up their testing, tracing and isolating capability to control
contamination
– A culture of social distancing and mandatory/wide mask usage is another key aspect of countries reopening process
• On the other hand, countries/regions such as Iran and a some USA states had issues to slowdown the curve after easing suppression
measures; those regions opened up before actually getting the situation under control and were not able to deploy mitigations tools efficiently
• Brazil is in a very similar position to Iran and USA states, easing suppression measures without fully controlling the disease and with no
real mitigation efforts in place. Building coordinated testing/tracing/isolating capabilities should be priority #1 for all States to allow for a
more smooth recovery process, with less need for another round of strong suppression measures
G L O B A L L A N D S C A P E R E O P E N I N G
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Reopening results: Some regions have already started the reopening process,
however not all of them are being able to control contamination levels
Many Asian and European countries are successfully moving forward with
relaxed quarantine restrictions while closely monitoring case growth
Other places, as Iran and some American states, are struggling to slowdown the
curve after the reopening due to inefficient suppression and mitigation measures
A S O F J U N E 2 9
Note: 7-day moving average reflects seven days prior to and including reporting date
Source: Wordometers, Johns Hopkins University, ABC News, CDC, WHO, Bloomberg, CNN, CBS News, Guardian, Inquirer, NHK World – Japan, Anadolu Agency, Focus Taiwan, The New York Times, VoA, Financial Times, Reuters, NPR, Taiwan News,
Time Out, Talking Points Memo, Bain Macro Trends Group analysis
TX
CA FL
Daily new deaths/100k hab New deaths 7-day average New cases 7-day averageLegend
G L O B A L L A N D S C A P E R E O P E N I N G
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Inefficient suppression and mitigation measures led to case growth
Success factors: While successful reopening stories have managed to deploy
robust mitigation tools, other countries/states that lacked such tools have struggled
G L O B A L L A N D S C A P E R E O P E N I N G
Mitigation
(High use of
technology)
Suppression
(Mobility
reduction)
• Utilization of effective
tracing system
• # of daily tests /
daily new cases1
• Big events authorization
Unconstrained
R0
• Population density of
main cities (k hab / km2)
• # of people/household
2-2.6
2.6
Exposure
immunity
• Case growth rate
after reopening (%)
Governmentmeasures
• Current mobility4 and
previous mobility5 (%)
Reopening
results
• Adjusted number of
cases / total pop. (%)
Italy
• Required mask usage
Banned Allowed
10195
Banned
Up to 15
people
234138
NYJapan IranGermany
-12%
(-27%)
-14%
(-34%)
-15%
(-37%)
-23%
(-68%)
4-124-103-55-9
2.42.12.4 3.5
2
(Manual
Tracing)
(Recent
app)
(App + Manual
Tracing)
(No structured
efforts mapped)
4-17
2.5
S. Korea
Banned
232
~0%
(-3%)
2
(Manual + Personal
Data Tracing)
N/A
Banned Banned
2-3
Brazil
-28%
(-40%)
3-8
3.3
(No structured
efforts mapped)
Stadiums/carnivals
at 50%capacity
15
Texas
-13%
(-21%)
1-1.5
2.8
(Some manual
tracing)
70
Note: (1) June 7th; (2) Only required in public transportation; (3) In closed public spaces + open lines (4) Versus baseline mobility; (5) Mobility on May 01st; Source: Google Mobility; Media Press Search; Bain Analysis; JHU Coronavirus Data Stream 10/06.
(App + Manual
Tracing)
3
(Some cities)
15Bain&Co - COVID19 Brazil POV - ...SAO
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Reopening tools: Most developed economies are using similar approaches to
reopen their countries and economies
Suppression measures are being gradually relaxed Mitigation actions are being strengthen
Ramp-up of mitigation capacity by strengthening the three pillars:
testing, tracing and isolating
• Creative solutions are removing bottlenecks and allowing for mass
test collection around the globe. E.g. testing through saliva and
home self-testing
Cultural aspects are key: social distancing etiquette generally
stays in place and masks are required in many places
– Wearing masks was already a part of social etiquette in Japan
– After the pandemic, some European countries made masks mandatory in
public spaces
– Also, the degree to which each population continues to abide by the distancing
guidelines will be very important for the success of the reopening process
The reopening has been taking place progressively with
prioritization of sectors based on risk vs impact
Large gatherings are restricted for the foreseeable future and
borders are still under control
• E.g. Oktoberfest cancellation in Germany; sports remain public-less
Emergency plans have proven to be necessary in case of new
outbreaks; some countries have had to apply localized lockdowns
• Mass testing or new lockdowns executed
– E.g. 10 million tested in Wuhan (China)
– E.g. Germany locked-down 2 districts after a slaughterhouse outbreak
Industry +
Medical Offices
Services +
Shops/Retail
Restaurants +
Entertainment
Low risk/high econ. impact High risk/low econ. impact
Collection Logistics Facilities Equip. and
Material
Testing
Tracing Isolating
Reopening is regionalized and based on careful risk assessment;
coordination between federal and local governments is key
• Plans are developed federally and detailed/deployed locally
• Regions are classified according to their risk and transit between
regions is usually prohibited
IT for chain mgmt.
G L O B A L L A N D S C A P E R E O P E N I N G
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Global landscape and implications for Brazil:
Preliminary takeaways from the economic recovery
• With most of the economy open at this point, key metrics from China show that the industrial sector has returned or is very close to pre-
pandemic levels. The same trend is starting to be observed in other countries that are advanced on the reopening process
– China manufacturing PMI rose from a low of 40.3 to 50.7 in May, indicating manufacturing firms are reopening
– Energy consumption, that went trough a stronger reduction in countries that experienced more severe lockdowns, has already recovered to at least ~90% of
previous levels
• On the other hand, economic sectors more dependent on consumption seem to be taking longer to recover to pre-pandemic levels. In
China, during March and April retail sales started to converge with 2019 sales, hovering ~5-15% below 2019
• Recovery pace is faster for essential categories whilst non-essential products were not only more affected during the crisis period but will also
present slower recoveries. Segments directly impacted by the lockdowns and mobility restrictions, such as restaurants and flights, will
take even longer to recover
• Most of the consumption gap comes from high income households in which spending levels are still ~13% below January. Significant increase
on savings reflects the lack of consumer confidence and uncertainties about economic recovery
• In the recovery process, leveraging digital channels has been an essential part of the recovery for most consumption-related segments.
Traditional brands that embraced digital channels seem to be leapfrogging competitors during the recovery
• Brazil should see a similar trend, with the industrial/extractive sectors returning faster to pre-crisis levels than consumption-driven segments
• With government aid being directed at lower income households, it is likely that a decent portion of the consumption gap in Brazil comes
from higher income households saving on less essential purchases; as the situation starts to stabilize, creating conditions and channels
for these consumers to feel confident can help accelerate the recovery
– Digital channels and creative models (try in your home, live streaming etc.) should continue to play a big role during the recovery phase
G L O B A L L A N D S C A P E E C O N O M I C R E C O V E R Y
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Industry: Once the epidemiological factors were controlled, many countries faced
an accelerated recovery in the supply side
Energy consumption & PMI recovering all around the worldIndustrials & Coal consumption recovering in China
Caixin General Manufacturing PMI
Coal Monthly consumption in largest state power plant (Monthly ; Indexed: Jan 2019 = 100)
• After drop in February, manufacturing PMI rose, indicating manufacturing is reopening
• Coal consumption has decreased 10-12 points during the pandemic, but has already
shown improvement during the month of May, achieving higher levels than 2019
Source: Trading Economics, Reuters, CNBC, IPSOS, CEIC, Bloomberg, Financial Times, NBS of China, Bain Macro Trends Group analysis, Bruegel; ONS, Trading Economics
Purchasing Managing Index (PMI) per country (%)
E C O N O M I C R E C O V E R Y I N D U S T R Y
• PMI seems to be recovering all around the world, indicating the return of supply activities
• Energy consumption went trough a stronger reduction in countries that experienced
more severe lockdowns, but already recovered to at least ~90%
Daily average electric energy consumption vs 2019 (100 basis from 1st day; 7 days average)
Average ~90% consumption
Days after quarantine measures where put in place
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Consumption: Economic sectors more dependent on consumption seem to be taking
longer to recover to pre-pandemic levels and there are a few trends that can be observed
Online channel plays an important role in the recoveryConsumption is taking longer to recover
2019 2020
Changes in retail sales (YoY)
Source: Trading Economics, Reuters, CNBC, IPSOS, CEIC, Bloomberg, Financial Times, NBS of China, China National Bureau of Statistics, Tmall & Taobao data, Opportunity Insights, USA Department of Commerce, Bain analysis
Essentials recover faster; other segments starting to improve
USA monthly consumption per segment (% of January; Indexed)
Essentials Non-essentials Segments directly
affected by
the pandemic
Change in ONLINE retail sales by sector (April1 2020, YoY LFL%)
Change in online AND offline retail sales by sector (April 2020, YoY LFL%)
Most of the spending gap comes from high income households
Low and middle income
segments are the ones receiving
government support
USA spending per income segment (% of January; Indexed)
E C O N O M I C R E C O V E R Y C O N S U M P T I O N
COVID-19 Fact Base and Potential Implications for Brazil - Short

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COVID-19 Fact Base and Potential Implications for Brazil - Short

  • 1. COVID-19 Fact base and potential implications for Brazil June 26th, 2020 Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited
  • 2. 2Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Context for these materials • COVID-19 is a humanitarian crisis and a global challenge. In this interconnected world, we have seen the virus spread rapidly, and we are still gathering information to understand both its origins and its impact • We are grateful for the businesses, governments, non-profits, and individuals around the world that are working to protect those that are sick or in danger of becoming so, and to “flatten the curve” • There is a lot that is still unknown about COVID-19; these materials are an attempt to shed light on what we know so far to help businesses make informed decisions – The top priority for all businesses is to protect the safety and health of employees and customers, for which there are WHO, CDC, and other national guidelines – Bain is not an expert on epidemiology and containment policies, however, given our 45+ years of experience advising companies during both economic booms and busts, we are committed to spreading accurate and timely information to reduce the unknowns for businesses and business leaders • Our focus is to enable companies to make rapid and practical decisions; with a global pandemic that is rapidly spreading and changing, now is not the time for detailed decision making; the need for speed and the right directional strategy outweighs the need to get intricate details right, and we are committed to helping business leaders navigate the path forward
  • 3. 3Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Global landscape and implications for Brazil: A different progression story • It is clear by now that South American countries will not follow the same trajectory (the bell-shaped curve) of most Asian or European countries – Even after more than 80 days of restriction measures, the peak does not seem to have been reached even under high mobility reduction (e.g. Colombia, Peru and Argentina) • Countries adopted different strategies to control the contagiousness level (R0); different combinations of favorable demographics, the widespread use of technology/testing and harsh suppression measures were needed to take the R0 below 1 and slowdown the curve – Although there were some correct measures in places like early mobility restriction and even good testing levels in a few countries (e.g. Colombia and Chile), this was not enough to compensate that higher starting R0 – Besides, not all mobility is the same, while in Europe people that needed to move was using their cars or even bikes, in South America the mobility was in crowded buses and for longer distances – Lastly, South American countries didn’t use technology in their favor – low/average testing levels, no use of tracing and no use of target quarantine policies • In summary, to compensate for the higher R0 starting point, South America should have used more weapons to control the virus – Brazil, in particular, has always had low testing levels, not enough mobility reduction in the high dense areas and no use of tracing technologies What is the current situation and outlook for Brazil? G L O B A L L A N D S C A P E
  • 4. 4Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Brazil What we expected… and what we see now What we expected... ...and what we see now • A long plateau of the disease would be maintained over the following 4-8 weeks at least, driven by states in multiple stages of the spread • The epidemiological perspective of a "long plateau scenario”, driven by states balancing the disease spread and the economy, has materialized for Brazil as a whole during the past month and continues to be our most likely scenario • The plateau has been driven by the different stages in which Brazilian states find themselves, both in terms of the disease spread and in terms of government actions • The “shape of the curve” for each state would be driven mostly by government actions, in order to balance the healthcare system capacity vs the economy reopening – As the disease progressed, we expected most states to trend towards a “control zone”, with R0 ≈ 1 and ICU occupancy ≈ 60-70% • Most states (14-18) have converged to the “control zone” in the past 30 days, reaching R0 ≈ 1 and ICU occupancy ≈ 60-70% – Most states that were in the medium/high risk areas improved and progressed towards a “control zone” with suppression and immunity – States that controlled contamination at a first stage started to release measures and saw an increase in # of cases – Only very few states that were in the low or medium risk zone "lost control" for different reasons and advanced to the high risk zone • We saw no evidence that more robust mitigation plans would be put into place, making it very hard for states to control the spread of the disease after lifting restrictions – Reaching enough exposure immunity seemed to be the only feasible way to get to a more controlled level of spread • States that were heavily impacted in the beginning (AM, PA, CE, MA) are the only ones to have managed to reduce contamination considerably without major changes on suppression and mitigation policies; their exposure immunity level of ~20% is likely playing a major role in their situation – There are still no clear signs that robust mitigation plans are “in-the works” to help with reopening economies B R A Z I L I A N P E R S P E C T I V E
  • 5. 5Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited The SARS hospitalizations metric shows that Brazil remains on a plateau of the disease; after a drop in weeks 21-22, week 23 (incomplete) already shows numbers trending up again Source: Fiocruz, Ministry of Health Epidemiological Week Hospitalizations due to SARS per epidemiological week (k# cases; week of the beginning of symptoms) A S O F J U N E 2 3 Weeks that are likely still considerably incomplete on the reports Estimated curve June-11 First wave of exponential growth - Concentrated in the state capitals initially more impacted (e.g. SP, RJ, CE, AM, MA, PA) Increase of contamination due to virus spread to other capitals, the countryside and smaller cities Long plateau - Growth in states that were spared during initial wave (e.g. MG, RS, PR, SC, MT, DF) combined with improving conditions in more severely impacted regions B R A Z I L I A N P E R S P E C T I V E C O N T A M I N A T I O N C U R V E
  • 6. 6Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Epidemiological status by state on May 25th: As the disease progressed, we expected most states would trend towards a “control zone”, with R0 ≈ 1 and ICU occupancy ≈ 60-70% Contamination R0 ICU average occupancy ratio GrowingSlowingDown Low Risk Medium Risk High Risk Note: ICU occupancy in the state of Minas Gerais on May 25 updated from COVID-19 ICU occupancy to general ICU occupancy, a measure that the state started to adopt in the last few days; R0 calculated as the ratio of average new deaths in the last 7 days to the previous 7 days Source: Ministry of Health and State Health Departments State position on May 25th A S O F M A Y 2 5 States with high ICU occupancy are at high risk of a health care system collapse and need to keep the R0 (contagiousness level) consistently below 1 so they can achieve a “sustainable” contamination stage B R A Z I L I A N P E R S P E C T I V E P R E V I O U S S T A T U S As states try to balance suppression/mitigation measures to control the disease with a controlled reopening of economies, we will likely see this “control zone” as a balancing point, with stable growth of cases and ICU occupancy under control
  • 7. 7Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Current situation in Brazil: most states are now classified as medium risk and we expect states to continue orbiting around the “control zone” over the following weeks 0.806545 1.272405 99.6777 11.11 Contamination R0 ICU average occupancy ratio Note: R0 calculated as the ratio of average new deaths in the last 7 days to the previous 7 days Source: Ministry of Health and State Health Departments Low Risk Medium Risk High Risk GrowingSlowingDown A S O F J U N E 2 6 As states try to balance suppression/mitigation measures to control the disease with a controlled reopening of economies, we will likely see this “control zone” as a balancing point, with stable growth of cases and ICU occupancy under control States with high ICU occupancy are at high risk of a health care system collapse and need to keep the R0 (contagiousness level) consistently below 1 so they can achieve a “sustainable” contamination stage B R A Z I L I A N P E R S P E C T I V E C U R R E N T S T A T U S
  • 8. 8Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Going forward: The upcoming scenario will vary by state or even micro-regions, but scenario 2 is the most likely to be the norm, until immunity is reached B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O Health System capacity Scenario 1 – relaxing suppression Estimated hospitalizations due to COVID-19 (# cases) Epidemiological Week • Strong peak of contamination with little response, leading to exponential case growth • Probable Collapse of the healthcare system Current hospitalizations Scenario 2 – opening and closing Health System capacity Estimated hospitalizations due to COVID-19 (# cases) Epidemiological Week Current hospitalizations • Continuous cycles of suppression to control R0 followed by easing of measures and R0 increase • Staggered curves of BR states lead to plateau • Healthcare is kept under stress during a significant period, and contamination only starts to slowdown due to exposure immunity Scenario 3 – robust mitigation plan Health System capacity Estimated hospitalizations due to COVID-19 (# cases) Epidemiological Week • Suppression measures are efficient and slowdown the curve in the next few weeks • Mitigation strategy is put in place and mobility reduction measures are lifted without new surges Current hospitalizations Most likely to be the norm I L L U S T R A T I V E
  • 9. 9Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Going forward: In fact, we already see signs that scenario 2 - “opening and closing” – is the most likely for Brazil, with states struggling to reopen the economy News reports in the past 15 days have filled-up with headlines about cases picking up and distancing measures being reinforced after many states started to open up their economies B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O
  • 10. 10Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Going forward: Combining effects from all States, the most likely scenario for Brazil is a long plateau of the disease until exposure immunity starts to play a role Estimated hospitalizations due to COVID-191 (# cases; epidemiological week of the beginning of symptoms) Projections Epidemiological Week Note: (1) With SARS Pneumonia symptoms; Source: Brazilian Ministry of Health – Public Health Emergency Operations Center; Bain Estimate. Healthcare system capacity Different stages of COVID-19 spread and government responses across Brazilian state should generate a long plateu in the curve After a significant period, exposure immunity should help states reduce the spread more consistently B R A Z I L I A N P E R S P E C T I V E U P C O M I N G S C E N A R I O With many states reopening their economies, we will likely continue to see cases go up and down for the following weeks
  • 11. 11Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Manufacture Transport. & Storage Commerce Economic impact: COVID-19 crisis will hit all sectors at different levels; while agriculture still has a positive GPD forecast vs 2019, most industries & services will be severely hit Legend Note: 1Baseline projection on Feb/20; 2Projection on June/20; 32018 growth vs 2020 Post-COVID projection Source: LCA GDP Growth projections; WTTC; FGV 2020 GDP growth projection before COVID-191 2020 GDP growth projection after COVID-192 ConstructionTourism3 Agriculture Industries Services Financial Services Real Estate Public. Adm High Impact Medium Impact Low Impact Energy & Water Agriculture Taxes Other Services Information Services A S O F J U N E 2 6 Mineral Extraction B R A Z I L I A N P E R S P E C T I V E E C O N O M I C I M P A C T
  • 12. 12Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Global landscape and implications for Brazil: Lessons from the reopening process • As government measures are successful and regions are able to control contamination levels, countries are starting to ease restrictions and mobility starts to return to previous levels. Asian and European countries are moving forward with relaxed quarantine restrictions while closely monitoring case growth • Most developed economies are using similar approaches to reopen their countries; they are gradually relaxing suppression measures whilst strongly reinforcing mitigation actions. There are a few important learnings for South American countries: – The reopening has been taking place progressively; sectors with low exposure and high economic impact such as industrial and workplaces are prioritized – On the other hand, there are specific mobility suppression measures being kept: major entertainment events, such as cultural activities and sports events, had their reopening delayed and borders remain under tight control – The reopening is usually regionalized and based on a careful risk assessment. The coordination between federal and local governments has been key to the success of this process; federal governments are responsible to set the strategy and local authorities are responsible for detailing and executing; Transit between regions of different risk profiles is usually restricted – Emergency plans have proven to be essential in the case of insurgent new outbreaks; the ability to lock-down cities/neighborhoods goes a long way – As countries started to reopen they gradually reinforced their mitigation efforts: ramping-up their testing, tracing and isolating capability to control contamination – A culture of social distancing and mandatory/wide mask usage is another key aspect of countries reopening process • On the other hand, countries/regions such as Iran and a some USA states had issues to slowdown the curve after easing suppression measures; those regions opened up before actually getting the situation under control and were not able to deploy mitigations tools efficiently • Brazil is in a very similar position to Iran and USA states, easing suppression measures without fully controlling the disease and with no real mitigation efforts in place. Building coordinated testing/tracing/isolating capabilities should be priority #1 for all States to allow for a more smooth recovery process, with less need for another round of strong suppression measures G L O B A L L A N D S C A P E R E O P E N I N G
  • 13. 13Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Reopening results: Some regions have already started the reopening process, however not all of them are being able to control contamination levels Many Asian and European countries are successfully moving forward with relaxed quarantine restrictions while closely monitoring case growth Other places, as Iran and some American states, are struggling to slowdown the curve after the reopening due to inefficient suppression and mitigation measures A S O F J U N E 2 9 Note: 7-day moving average reflects seven days prior to and including reporting date Source: Wordometers, Johns Hopkins University, ABC News, CDC, WHO, Bloomberg, CNN, CBS News, Guardian, Inquirer, NHK World – Japan, Anadolu Agency, Focus Taiwan, The New York Times, VoA, Financial Times, Reuters, NPR, Taiwan News, Time Out, Talking Points Memo, Bain Macro Trends Group analysis TX CA FL Daily new deaths/100k hab New deaths 7-day average New cases 7-day averageLegend G L O B A L L A N D S C A P E R E O P E N I N G
  • 14. 14Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Inefficient suppression and mitigation measures led to case growth Success factors: While successful reopening stories have managed to deploy robust mitigation tools, other countries/states that lacked such tools have struggled G L O B A L L A N D S C A P E R E O P E N I N G Mitigation (High use of technology) Suppression (Mobility reduction) • Utilization of effective tracing system • # of daily tests / daily new cases1 • Big events authorization Unconstrained R0 • Population density of main cities (k hab / km2) • # of people/household 2-2.6 2.6 Exposure immunity • Case growth rate after reopening (%) Governmentmeasures • Current mobility4 and previous mobility5 (%) Reopening results • Adjusted number of cases / total pop. (%) Italy • Required mask usage Banned Allowed 10195 Banned Up to 15 people 234138 NYJapan IranGermany -12% (-27%) -14% (-34%) -15% (-37%) -23% (-68%) 4-124-103-55-9 2.42.12.4 3.5 2 (Manual Tracing) (Recent app) (App + Manual Tracing) (No structured efforts mapped) 4-17 2.5 S. Korea Banned 232 ~0% (-3%) 2 (Manual + Personal Data Tracing) N/A Banned Banned 2-3 Brazil -28% (-40%) 3-8 3.3 (No structured efforts mapped) Stadiums/carnivals at 50%capacity 15 Texas -13% (-21%) 1-1.5 2.8 (Some manual tracing) 70 Note: (1) June 7th; (2) Only required in public transportation; (3) In closed public spaces + open lines (4) Versus baseline mobility; (5) Mobility on May 01st; Source: Google Mobility; Media Press Search; Bain Analysis; JHU Coronavirus Data Stream 10/06. (App + Manual Tracing) 3 (Some cities)
  • 15. 15Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Reopening tools: Most developed economies are using similar approaches to reopen their countries and economies Suppression measures are being gradually relaxed Mitigation actions are being strengthen Ramp-up of mitigation capacity by strengthening the three pillars: testing, tracing and isolating • Creative solutions are removing bottlenecks and allowing for mass test collection around the globe. E.g. testing through saliva and home self-testing Cultural aspects are key: social distancing etiquette generally stays in place and masks are required in many places – Wearing masks was already a part of social etiquette in Japan – After the pandemic, some European countries made masks mandatory in public spaces – Also, the degree to which each population continues to abide by the distancing guidelines will be very important for the success of the reopening process The reopening has been taking place progressively with prioritization of sectors based on risk vs impact Large gatherings are restricted for the foreseeable future and borders are still under control • E.g. Oktoberfest cancellation in Germany; sports remain public-less Emergency plans have proven to be necessary in case of new outbreaks; some countries have had to apply localized lockdowns • Mass testing or new lockdowns executed – E.g. 10 million tested in Wuhan (China) – E.g. Germany locked-down 2 districts after a slaughterhouse outbreak Industry + Medical Offices Services + Shops/Retail Restaurants + Entertainment Low risk/high econ. impact High risk/low econ. impact Collection Logistics Facilities Equip. and Material Testing Tracing Isolating Reopening is regionalized and based on careful risk assessment; coordination between federal and local governments is key • Plans are developed federally and detailed/deployed locally • Regions are classified according to their risk and transit between regions is usually prohibited IT for chain mgmt. G L O B A L L A N D S C A P E R E O P E N I N G
  • 16. 16Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Global landscape and implications for Brazil: Preliminary takeaways from the economic recovery • With most of the economy open at this point, key metrics from China show that the industrial sector has returned or is very close to pre- pandemic levels. The same trend is starting to be observed in other countries that are advanced on the reopening process – China manufacturing PMI rose from a low of 40.3 to 50.7 in May, indicating manufacturing firms are reopening – Energy consumption, that went trough a stronger reduction in countries that experienced more severe lockdowns, has already recovered to at least ~90% of previous levels • On the other hand, economic sectors more dependent on consumption seem to be taking longer to recover to pre-pandemic levels. In China, during March and April retail sales started to converge with 2019 sales, hovering ~5-15% below 2019 • Recovery pace is faster for essential categories whilst non-essential products were not only more affected during the crisis period but will also present slower recoveries. Segments directly impacted by the lockdowns and mobility restrictions, such as restaurants and flights, will take even longer to recover • Most of the consumption gap comes from high income households in which spending levels are still ~13% below January. Significant increase on savings reflects the lack of consumer confidence and uncertainties about economic recovery • In the recovery process, leveraging digital channels has been an essential part of the recovery for most consumption-related segments. Traditional brands that embraced digital channels seem to be leapfrogging competitors during the recovery • Brazil should see a similar trend, with the industrial/extractive sectors returning faster to pre-crisis levels than consumption-driven segments • With government aid being directed at lower income households, it is likely that a decent portion of the consumption gap in Brazil comes from higher income households saving on less essential purchases; as the situation starts to stabilize, creating conditions and channels for these consumers to feel confident can help accelerate the recovery – Digital channels and creative models (try in your home, live streaming etc.) should continue to play a big role during the recovery phase G L O B A L L A N D S C A P E E C O N O M I C R E C O V E R Y
  • 17. 17Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Industry: Once the epidemiological factors were controlled, many countries faced an accelerated recovery in the supply side Energy consumption & PMI recovering all around the worldIndustrials & Coal consumption recovering in China Caixin General Manufacturing PMI Coal Monthly consumption in largest state power plant (Monthly ; Indexed: Jan 2019 = 100) • After drop in February, manufacturing PMI rose, indicating manufacturing is reopening • Coal consumption has decreased 10-12 points during the pandemic, but has already shown improvement during the month of May, achieving higher levels than 2019 Source: Trading Economics, Reuters, CNBC, IPSOS, CEIC, Bloomberg, Financial Times, NBS of China, Bain Macro Trends Group analysis, Bruegel; ONS, Trading Economics Purchasing Managing Index (PMI) per country (%) E C O N O M I C R E C O V E R Y I N D U S T R Y • PMI seems to be recovering all around the world, indicating the return of supply activities • Energy consumption went trough a stronger reduction in countries that experienced more severe lockdowns, but already recovered to at least ~90% Daily average electric energy consumption vs 2019 (100 basis from 1st day; 7 days average) Average ~90% consumption Days after quarantine measures where put in place
  • 18. 18Bain&Co - COVID19 Brazil POV - ...SAO Copyright @ 2020 Bain & Company. All rights reserved. Any use of this material without specific permission of Bain & Company is strictly prohibited Consumption: Economic sectors more dependent on consumption seem to be taking longer to recover to pre-pandemic levels and there are a few trends that can be observed Online channel plays an important role in the recoveryConsumption is taking longer to recover 2019 2020 Changes in retail sales (YoY) Source: Trading Economics, Reuters, CNBC, IPSOS, CEIC, Bloomberg, Financial Times, NBS of China, China National Bureau of Statistics, Tmall & Taobao data, Opportunity Insights, USA Department of Commerce, Bain analysis Essentials recover faster; other segments starting to improve USA monthly consumption per segment (% of January; Indexed) Essentials Non-essentials Segments directly affected by the pandemic Change in ONLINE retail sales by sector (April1 2020, YoY LFL%) Change in online AND offline retail sales by sector (April 2020, YoY LFL%) Most of the spending gap comes from high income households Low and middle income segments are the ones receiving government support USA spending per income segment (% of January; Indexed) E C O N O M I C R E C O V E R Y C O N S U M P T I O N