WHO Warns Swine 'Flu Cannot Be Contained, Economic Concerns Mount

More Cases Emerge

Since the weekend the world's media have led with the A/H1N1 swine influenza ('flu) epidemic, raising public awareness of the risks and precautions but also sowing fear. Every new case that is confirmed enters the news cycle and increases the sense of crisis. Keeping some perspective is therefore important—are we really facing the nightmarish scenario of a global pandemic, or will it die down much as Asia's avian 'flu did earlier this decade? It is unfortunately too early to be certain either way, but the latest news offers some limited reassurance.

More cases are being confirmed by the hour in Mexico; this is alarming, but to be expected as more sufferers seek treatment and the authorities improve their surveillance. Greater public awareness also means that more cases are being correctly identified than before. The virus has spread to most of the country, with some 10 states now affected. Over 150 deaths have now been linked to the virus, which raises the perplexing question of why it is proving much less deadly for sufferers overseas. The most likely explanation is that infection has been massively under-reported in Mexico, and that the deaths only amount to a tiny proportion of the total. If this is the case, we are seeing a virus that is much more contagious than the H5N1 avian 'flu (which first emerged in 1997), but much less deadly (the latter has killed 257 of the 421 people it has infected). China's 2002–03 severe acute respiratory syndrome (SARS) outbreak was in turn much more contagious than H5N1, but less deadly (it killed around 17% of sufferers in Hong Kong during 2003, while the global total was around 900). The 1918 Spanish 'flu was both very deadly and contagious, killing as many as 100 million. The Mexican authorities currently report a total of 2,000 suspected cases, but the figure is climbing very rapidly. The more worrying scenario than under-reporting is that there is a different and more potent strain now in circulation. The first known A/H1N1 infection was of a four-year-old boy who lived near a pig farm in southern Veracruz state. This farm is run by U.S.-based Smithfield Foods and Mexico's Agroindustrias Unidas, although they deny involvement as their pigs had been vaccinated and no workers have been taken ill.

As already mentioned, outside of Mexico the cases to date have proved mild and sufferers are responding well to treatment. That existing anti-viral drugs appear to be effective comes as a great relief. The U.S. Centers for Disease Control and Prevention has now confirmed 40 cases in the United States, with victims ranging from 7 to 54 years old. Another eight cases have been confirmed by state and local health agencies. Most of the sufferers have recently travelled to Mexico or California (close to the Mexican border). Two cases have been confirmed in the United Kingdom, and there are several dozen other suspected cases. There is one confirmed case in Spain and six in Canada. The World Health Organization (WHO) yesterday lifted its global alert to phase 4 from phase 3. This recognises that the virus is spreading from person to person, rather than simply from pigs to humans. This is a worrying development, but it was already clear that this was happening. Phase 6 indicates a proper pandemic. The WHO warned that it is now impossible to contain the virus, and advised governments to focus instead on mitigation.

Precautions and Disruption

Cases may be limited in number and relatively mild around the world, but the epidemic is severe in Mexico and is causing widespread disruption. With over 150 deaths now linked to the outbreak and several thousand hospitalised, schools and universities have been closed across the country. In Mexico City much activity has ground to a halt. The majority of restaurants, cinemas, and nightclubs have been closed, although most other businesses have stayed open. However, the volume of customers is down, and many employees are electing to work from home. A huge public information campaign has been launched, urging anyone who has 'flu-like symptoms to go quickly to hospital. Face masks have been widely distributed. The government is meanwhile conducting mass tests on pig farms to try to identify the source of the outbreak.

Travel advisories have been issued by many countries around the world, urging citizens to avoid all non-essential travel to Mexico. More controversially, some are also advising against travel to the United States. This includes the European Union (EU), although officials later changed their tune. The U.S. authorities are moving vigorously to ensure precautions are in place given the extent of cross-border integration with Mexico. This is another early test for the administration of President Barack Obama, and is particularly challenging when the new head of the Department of Health and Human Services has yet to be appointed. The Senate starts debating the nomination of Kansas Governor Kathleen Sebelius today, although amid the 'flu crisis accelerated approval is expected.

Most governments are now better prepared for 'flu pandemics than they were prior to the 2003 SARS epidemic (which ultimately spread to 37 countries). Stocks of anti-viral drugs are much greater and systems for distribution are better established. Nonetheless, treatments using drugs such as Tamiflu and Relenza need to be administered within the first two days of symptoms being exhibited (or prior to infection) to be properly effective. The United States issued a pandemic 'flu preparedness plan in 2005, and since 2006 US$6.2 billion has been spent on stockpiling anti-virals and stepping up surveillance. Even in the United States there are gaps, however, and some Democrats have accused the last Republican administration of making dangerous cutbacks. Authorities in Asia invested heavily after the SARS and Avian 'flu outbreaks, and key airports have re-instigated vigorous testing. In Europe, pandemic plans were drawn up in 2005 and 2006, and these are being dusted off now. Anti-viral stockpiles are reportedly more extensive even than those in the United States. Treatment will be much harder to come by if the infection spreads to emerging markets with less well-resourced health systems, however.

Outlook and Implications

The outbreak is threatening to jolt the global economy at a highly vulnerable time. There are concerns on a number of levels:

• Trade Restrictions and the Agricultural Sector: Despite the fact that the virus is passed between humans and is not contracted by eating pork, this has not stopped a range of countries introducing trade restrictions. China, Russia, Thailand, and Ukraine are among countries halting pork, and even some other meat imports, from Mexico and affected U.S. states. This comes at a time when governments have been under pressure not to resort to protectionism and to help trade volumes recover. Clearly, the Mexican pork sector faces extremely difficult times, and demand around the world for the meat is also expected to suffer. Some lean-hog-futures prices at the Chicago Mercantile Exchange fell by the daily exchange-imposed price limit yesterday on concerns that consumers around the world will shun pork in favour of other meats. Major pork producers, including Smithfield and Tyson Foods, saw their shares decline sharply.
• Travel and Tourism: These sectors are most vulnerable to a public health emergency, as travellers can switch or cancel their plans quickly. Mexico is of course suffering the brunt of this, and tourism is one of its most lucrative sectors. However, passenger volumes to the United States are also likely to fall after the rash of travel advisories in the EU and elsewhere. Airline stocks have fallen sharply over the past two days. Emerging markets heavily dependent on tourism would see their economies hit hardest by a global drop-off in passenger volumes.
• Market Sentiment: More immediate and widely felt than the factors above is likely to be the impact on broader market sentiment. News of the growing epidemic helped depress stock markets yesterday and this looks set to continue today. The Dow Jones Industrial Average was off 51.29 points at close at 8,025, although this was by no means a rout. Mexico's Bolsa slid by over 3%, and the peso was also down sharply. Asian markets have lost ground today and U.S. futures are also negative. This comes just as markets were showing some life amid greater optimism over the global economic outlook. So far there has been no market crash, however, and there is some optimism that traders' focus will shift to other issues before long. Whether consumer sentiment outside of Mexico will suffer is harder to say. It seems the epidemic will have to become much worse before any real impact is detected.
• The Pharmaceutical Sector: While airline stocks have been hammered, pharmaceutical stocks have jumped sharply in anticipation of heavy demand for anti-virals. Whether governments actually need to place additional orders given the extent of their stockpiles is in question, however. The maker of leading anti-viral drug Tamiflu is Switzerland's Roche Holdings, while the United Kingdom's GlaxoSmithKline makes Relenza. Both are reportedly effective against the current strain in circulation. Other firms such as Novartis are working on a vaccine, although the process typically takes between three and six months.

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