Vaccine delays threaten economies hardest hit by pandemic

Political fights and production bottlenecks are stymieing Brazil's vaccination efforts. Mexico is struggling to source doses as its death toll surpasses India's. Colombia only began administering shots last week.

Such sluggishness alongside a recent spike in infections risks hampering an already slow economic recovery.

"If vaccination and public health policy don't succeed at reversing the trend that we've seen in recent months, clearly this recovery is at risk," Alejandro Werner, the International Monetary Fund's Western Hemisphere director, said this month.

Latin America's economic rebound was wobbling after a new round of lockdown measures in response to the surge in cases that began around the late-2020 holidays. Since January, JPMorgan Chase & Co. trimmed its first quarter growth forecasts for Argentina, Brazil, Chile, Colombia and Mexico, citing concerns of rising case load and new restrictions.

The region contracted by more than 7% last year, according to the IMF, the most in the world. The fund does not see output returning to prepandemic levels until 2023, and this year is off to a rocky start.

In December, Brazilian retail sales suffered their biggest drop for the month on record, included in a sharp slowdown in Latin America's largest economy. Meanwhile, Mexico saw its recovery lose steam as growth slowed to 3.1% from 12.1% over the last two quarters of 2020.

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Activity is expected to pick up this year, but a strong rebound depends on vaccines becoming more widely available in the coming months. Underscoring the importance of an efficient vaccine rollout, investors are already rewarding Latin America's only success story: Chile, which is on pace to vaccinate 75% of its population in six months, according to Bloomberg's Vaccine Tracker.

This month, Moody's Investors Service and Spain's Banco Santander revised upward their growth forecasts for Chile, setting it apart from its neighbors. Its economy will recover to prepandemic levels three to six months earlier than most other countries in the region, according to Nikhil Sanghani, an economist at Capital Economics in London.

The Chilean peso has led gains among regional peers, rallying more than 3% this month.

Other countries in the region are nowhere close. At the current rate, Brazil would take 2 1/2 years to reach the 75% level of vaccination, which is the threshold experts say is needed for a return to normality. Mexico would take 3.6 years, and Argentina would take over a decade. The United States, in contrast, is projected to reach that level by the end of the year.

This outlook may improve over the next few weeks as some of the "teething problems" with the vaccine rollout start to ease, Sanghani said.

Delays in deliveries have sent countries that relied heavily on particular vaccines, such as Mexico and Colombia, running to make last-minute contracts with competitors. Argentina is trying to produce more locally.

After dragging its feet for months in making orders, the administration of Brazilian President Jair Bolsonaro is running out of doses to sustain its vaccination campaign, leading nine state capitals including Rio de Janeiro to suspend immunizations.

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The holdups in the vaccination drive are not all self-inflicted.

From the start, poorer countries have been pushed to the back of the line by wealthier ones that quickly sealed deals with drugmakers, or are now commandeering vaccinations produced in their territory for their own citizens.

Much of the Caribbean and Central America are weeks away from kicking off their campaigns. Jamaica's Prime Minister Andrew Holness last month accused rich countries of "hoarding" vaccines.

Economists watching mobility trends are bracing for another hit to activity caused by people once again staying home and businesses closing shop. Chile aside, they remain skeptical about restrictions relief for the rest of the region given their slow start and distance from major vaccine distributors.

"Richer countries already started to buy out everything they could, only leaving breadcrumbs for the rest," said Joan Domene, a Mexico City-based economist for Oxford Economics.