Geopolitics

Winners And Losers In The Coronavirus Economic Crisis

The pandemic will stress existing trends toward digitalization and wealth concentration — others will pay the price.

An Amazon Fulfillment Center in Kenosha, Wisconsin, days after over 30 employees tested positive for coronavirus.
An Amazon Fulfillment Center in Kenosha, Wisconsin, days after over 30 employees tested positive for coronavirus.
Carlos Quezada

-Analysis-

SANTIAGO — Given the turmoil in world markets, uncertainty over when the pandemic will end and questions about the measures governments are taking to manage to the situation, it's worth looking back at some previous, epidemic-borne crises that affected countries or groups of countries.

The most costly, in economic terms, came with the 2009 swine flu ($59 billion), the 1957 Asian flu ($32 billion) and 2005 bird flu ($10 billion).

Even more so than those past crises, the deadly COVID-19 pandemic has caused significant paralysis to the world economy, with certain industries particularly hard hit. And yet, in the midst of the mayhem there are also a few bright spots: companies and sectors that are not only weathering the storm, but also making gains.

Moving forward, the two sectors with most potential for growth will be health care and technology, which together constitute 60% of our investment portfolios. In this pandemic, the U.S. tech sector (Nasdaq) lost up to 24% of its value in March. Since then, however, it has not only recovered those losses but has even added value.

In health care, several drug firms are working on a vaccine or remedies for COVID-19. The most important include Moderna, a U.S. biotech firm that rose 37% in value in one month, and Tilray, which has risen 27%. Another firm that sharply appreciated in May (83%) was Aurora Cannabis, a Canadian firm that recently bought the U.S. firm Reliva.

Moving forward, the two sectors with most potential for growth will be health care and technology.

Tech has greatly benefited from the coronavirus, with an exponential rise in e-trading and confinement measures that have acted as the sector's biggest ever boost. Firms with the most promising stock are Facebook, which has announced a new purchasing system for its different platforms and taken its trading prices to new peaks, and Amazon. Netflix is worth 30% more this year, as is Spotify.

The worst-off sectors, on the other hand, are industry, aeronautics, luxury goods and sports. In Chile, we have seen LATAM Airlines stock plummet 75% this year. There have also been considerable layoffs and the possibility of defaulting on loans and debt papers. Abroad, Boeing has lost 62% of its value though unlike Latam, recouped 6% of its losses in May.

ZUMA_inside_winner_losers_economy_AE

The logo of Moderna, Inc, a clinical stage biotechnology company. —Photo: Andre M. Chang

With sports and luxury, uncertain times cut demand for their products, which are likely to recover, nevertheless, once the economy resumes. Fashion brand Michael Kors lost 60% of its stock value this year though it regained 15% this month, thanks to the renewed economic activity seen in recent months. Certainly, we would not see an immediate recovery in sports as in spite of the fact that gatherings will be permitted, mass attendance for stadium events seems unlikely for now. To illustrate, Juventus stocks have depreciated 40%.

After a recovery that may take years, the world will be ready for a new growth cycle. The coronavirus crisis, then inflation, will pave the way for the future of the world economy, though one must remember that COVID-19 is but a catalyst in this process. It will not create new ideas nor destroy infrastructures or material values. In other words, the "old" economy will remain intact.

Robotization and productivity growth will likely further widen the gap between the rich and poor, and robots will prove more effective workers than people. In the new paradigm, profitable countries will be those able to invest most capital in their economies, which evidently will be the wealthier ones. Thus, in the new cycle, expect developed countries to enjoy higher growth rates than developing countries.

*Quezada is a senior analyst with Libertex, an investment firm in Chile.

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Society

A Mother In Spain Denied Child Custody Because She Lives In Rural Area

A court in Spain usurps custody of the one-year-old boy living with his mother in the "deep" part of the Galicia region, forced to instead live with his father in the southern city of Marbella, which the judge says is "cosmopolitan" with good schools and medical care. Women's rights groups have taken up the mother's case.

A child in Galician countryside

Laure Gautherin

A Spanish court has ordered the withdrawal of a mother's custody of her one-year-old boy because she is living in the countryside in northwestern Spain, where the judge says the child won't have "opportunities for the proper development of his personality."

The case, reported Monday in La Voz de Galicia, has sparked outrage from a women's rights association but has also set off reactions from politicians of different stripes across the province of Galicia, defending the values of rural life.


Judge María Belén Ureña Carazo, of the family court of Marbella, a city on the southern coast of 141,000 people, has ordered the toddler to stay with father who lives in the city rather than with his mother because she was living in "deep Galicia" where the child would lack opportunities to "grow up in a happy environment."

Front page of La Voz de Galicia - October 25, 2021

Front page of La Voz de Galicia - Monday 25 October, 2021

La Voz de Galicia

Better in a "cosmopolitan" city?


The judge said Marbella, where the father lives, was a "cosmopolitan city" with "a good hospital" as well as "all kinds of schools" and thus provided a better environment for the child to thrive.

The mother has submitted a formal complaint to the General Council of the Judiciary that the family court magistrate had acted with "absolute contempt," her lawyer told La Voz de Galicia.

The mother quickly accumulated support from local politicians and civic organizations. The Clara Campoamor association described the judge's arguments as offensive, intolerable and typical of "an ignorant person who has not traveled much."

The Xunta de Galicia, the regional government, has addressed the case, saying that any place in Galicia meets the conditions to educate a minor. The Socialist party politician Pablo Arangüena tweeted that "it would not hurt part of the judiciary to spend a summer in Galicia."

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