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Cebu’s Mahiga River to be rehabilitated

REHABILITATION of the 9.1 kilometer Mahiga River in Cebu province will be conducted in partnership with 28 private companies and organizations, the Department of Environment and Natural Resources (DENR) said.

On July 21, Environment Secretary Roy A. Cimatu, Cebu City Mayor Edgardo C. Labella and Mandaue City Mayor Jonas C. Cortes, signed a Memorandum of Agreement with the various partners.

The rehabilitation will take place under the DENR’s “Adopt-an Estero/Water body” program, which enlists private entities in clearing out waste, debris, and silt from the water system.

Under the agreement, the partners will “adopt” the Mahiga River and come up with a program to reduce the pollution load on the river and its tributaries.

Environmental Management Bureau Region 7 Director Lormelyn E. Claudio said the river’s deterioration poses health and safety risks for the communities along its banks.

“Mahiga River Creek is a critical waterway in the city and its current condition requires intensified action from all stakeholders to ensure the sustainability of all rehabilitation measures,” Ms. Claudio said.

Cebu City and Mandaue City will establish integrated solid, healthcare, and household hazardous waste management systems under the agreement.

Meanwhile the DENR will monitor industrial and commercial establishments and perform regular water quality monitoring. — Revin Mikhael D. Ochave

Impairment considerations during COVID-19

(Second of two parts)

In last week’s article, we discussed how to determine the timing of assessment for any impairment for non-financial assets, as well as the indicators of impairment. This article will cover how to measure and estimate the recoverable amount of an asset, how to determine the recognition and reversal of impairment, and provide detailed disclosure on assumptions used to fully understand an impairment assessment especially in these uncertain times.

MEASUREMENT
An asset is impaired when an entity is not able to recover its carrying value (i.e., the amount shown on the entity’s balance sheet) either by using it or selling it. The recoverable amount is the higher of the asset’s (or group of assets’) fair value less costs of disposal (FVLCD) and value in use (VIU).

VIU involves estimating the future cash inflows and outflows that will be derived from the use of the asset and from its ultimate disposal and discounting the cash flows at an appropriate rate. The calculation of an asset’s VIU incorporates an estimate of expected future cash flows, and expectations about possible variations of such cash flows. The forecasted cash flows should reflect management’s best estimate at the end of the reporting period of the economic conditions that will exist over the remaining useful life of the asset. This means entities should consider both short-term effects and long-term effects on assets with longer useful life, such as capital assets and goodwill.

Due to the evolving COVID-19 situation, there are significant challenges to preparing the forecast or budgets for future cash flows. In these circumstances, an expected cash-flows approach based on probability-weighted scenarios may be more appropriate than the traditional single best estimate when estimating VIU. In coming up with scenarios, entities should consider the length and severity of the pandemic, government measures, availability of proper intervention (i.e., vaccine), distribution and supply chains, revenue growth and collections, capital, changes in regulations, and changes in customer behaviors, among others.

Cash flows are discounted at an appropriate rate, which is a pre-tax discount rate that reflects current market assessments of the time value of money and asset-specific risks for which future cash flow estimates have not been adjusted. The discount rate should likewise consider the price for bearing the uncertainty inherent in the asset, and other factors, such as illiquidity, that market participants would reflect in pricing the future cash flows the entity expects to derive from the asset. It is therefore highly important to exercise careful judgement when determining the discount rate to be applied.

RECOGNITION AND REVERSAL OF IMPAIRMENT
An impairment loss is recognized to the extent the carrying amount exceeds its recoverable amount. In subsequent periods, external and internal sources of information (such as significant favorable changes in the market conditions, the asset’s value, use and performance) may indicate that an impairment loss recognized for an asset, other than goodwill, may no longer exist or may have decreased. In this case, previous impairment losses may be reversed. Note, however, that an impairment reversal cannot be recognized merely from the passage of time or improvement in general market conditions. When an impairment reversal is recognized for assets other than goodwill, the adjusted carrying amount of the asset may not exceed the carrying amount of the asset that would have been determined had no impairment loss been previously recognized.

PAS 36 specifically prohibits the reversal of impairment losses for goodwill. If impairment on goodwill was determined and recognized in the interim period, it cannot be reversed in the subsequent interim periods or at year-end.

DISCLOSURE
Disclosure is particularly crucial in these times. Due to sensitivity, it is critical for an entity to provide detailed disclosures on the assumptions used, the evidence these are based on, and the impact of a change in key assumptions. Disclosures include, among others, the valuation methodology used and the approach in determining the appropriate assumptions and key assumptions used in cash flow projections aside from long-term growth rate and discount rate; the values of the key assumptions and the probability weights of multiple scenarios when using an expected outcome approach; and inputs used in determining the discount rate and the source thereof. This makes it also important to go beyond minimum disclosure requirements to help users better understand the impairment assessment.

KEY TAKEAWAY
With the COVID-19 situation, impairment assessment will be a complex and difficult undertaking. Hence, it is imperative for management to be judicious, more prudent and to employ careful judgment in making assumptions, especially when forecasting cash flows and determining the discount rate to be used.

It must be noted that cash flow forecasts may now be substantially — if not completely — different from pre-pandemic or existing budgets. Moreover, historical and comparative data may no longer be relevant and helpful in making such forecasts. Assumptions must be updated and should be drawn from and be reflective of the current pandemic circumstances.

This naturally requires a more cautious outlook for the future. As previously mentioned, the impact of COVID-19 may no longer be reflected in a single set of cash flows due to the high degree of uncertainty involved; there may be a need to develop multiple scenarios and apply probabilities to each scenario to arrive at the expected cash flows. In evaluating these scenarios, those with a downward impact on cash flows and on the value of the asset should be given more weight to reflect the market view of risk and uncertainty.

On the other hand, determining the discount rate is equally challenging given the current market volatility, and that most relevant parameters and inputs to determine discount rates have become unpredictable. Values and assumptions which were accepted, used and applied in the past and in previous impairment assessments and testing may no longer be reasonable or appropriate.

For instance, beta and cost of equity may have increased significantly due to capital market volatility; risk-free rates are reaching lows; and debt liquidity issues are severely affecting the cost of debt for many companies. That said, the risk-adjusted discount rates to be used should be calculated with serious considerations for the current market and economic conditions, the value of comparable reporting entities or assets that is available and evident in the market, and the risks of the asset or cash-generating unit to be valued.

The pandemic continues to evolve and until such time that a proper and permanent intervention is identified, there remains significant uncertainty about our future, our economy and business viability. Until then, the recoverability of most entities’ assets remains the focus and they will need to continuously reassess, recalibrate and be transparent about their assumptions and outlook for the future of their business. Disclosure is key — if not paramount — to understanding all these under the current situation.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Meynard A. Bonoen is an Assurance Partner of SGV & Co.

COVID-19 and the economy

 

I am pleased to share with readers excerpts from recent posts to subscribers of GlobalSource Partners (globalsourcepartners.com), a New York-based network of independent analysts, mostly former finance and central bank officials. Its subscribers are “investors and business leaders including asset managers, traders and analysts, investment bank economists, private equity investors, corporate CFO’s, and multilateral officials.” Christine Tang and I serve as their Philippine Advisors.

THE STICK FOR NOW (JULY 22)
President Rodrigo Duterte has found himself caught between a rock and a hard place. On the one hand, COVID-19 cases are rising, with data from the Department of Health (DoH) showing the seven-day average positivity rate for daily tests close to 12% compared with a little over 6% a month ago and with experts estimating the reproduction number in Metro Manila rising from 1.2 to 2. On the other hand, quarantine measures have taken their toll on the economy, with survey data from the trade department showing that most of the country’s largely small businesses are either closed (26%) or in partial operation (52%), and with the finance secretary earlier calling for more easing of quarantine restrictions to revive economic activity.

Left in a bind, the President’s interior secretary, a former army general and member of the COVID-19 task force, has proposed using the police in house-to-house searches and transferring those suspected of carrying the coronavirus to government isolation facilities; an idea that was immediately met with strong public criticism. Stepping back from this proposal, President Duterte instead warned the public yesterday to wear masks and practice social distancing, or face arrest. He called on local government officials and the police to do their duty in enforcing quarantine rules set by the national government or face possible charges of negligence and removal from office.

While the President seems to be responding to the general lack of discipline in observing the most basic quarantine rules, the problem of rising COVID-19 cases may be more directly correlated with inadequate contact tracing and lack of incentives for exposed individuals to self-quarantine. As it is, exposed people with mild or no symptoms may not know that they have been infected while those who suspect themselves infected but are only mildly symptomatic or asymptomatic may not have isolation rooms at homes or may choose to forego testing as they may not be able to afford the income loss from being quarantined. Compared to providing subsidies (the carrot) to suspected carriers to stay home, the threat of arrest (the stick) seems to be a far inferior solution, even putting frontline policemen at risk of contracting the coronavirus, and may even create an incentive to avoid being tested or to hide if feeling unwell.

This puts the upcoming debate over the proposed stimulus bill (Bayanihan 2), expected to start when congress opens next week, front and center. As it stands, fiscal managers maintain that the Constitution bars the executive from proposing a larger than P140-billion stimulus while the lower house of congress remains adamant in passing an outsized package worth P1.3 trillion. There were rumors early on of a middle-of-the-road package brokered by Malacañang; whether or not true remains to be seen.

In addition to Bayanihan 2, the financial community is also looking forward to several bills being proposed by the economic managers, including the Financial Institutions Strategic Transfer Act or FIST and the Government Financial Institutions (GFIs) Unified Initiatives to Distressed Enterprises for Economic Recovery or GUIDE Act. These are intended to keep banks’ nonperforming loans under control by proactively providing a legal framework for dealing with distressed assets and by directly assisting distressed firms through capital increases for GFIs. While banks’ non performing loans (NPLs) remain low based on latest data, the lesson from history is that these will rise after a lag (Chart 1). That said, we think NPLs this time around are unlikely to reach the record levels of the 1980s and ‘90s thanks to stronger macroeconomic fundamentals, monetary policy accommodation that has kept interest rates low and the peso stable, and better capitalized banks.

WHERE TO PHILIPPINE PESO? (JULY 10)
During Wednesday’s pre-State of the Nation Address (SONA) that focused on the Duterte administration’s economic achievements this past year, one chart in particular caught our attention. Presented by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, the bar chart shows the Philippine peso alongside eight other east and southeast Asian currencies, with the peso standing out as one of only two currencies that has appreciated against the dollar this year. (Chart 2) Moreover, it topped the other currency, the Japanese yen, in terms of the rate of appreciation. Close competing currencies like the Indonesian rupiah, the Thai baht and the Malaysian ringgit have all depreciated by around 4%.

Why is the peso relatively stronger despite the more aggressive policy rate cuts by the BSP so far this year?

1. Governor Diokno provided one of the reasons, which is the Philippine’s comparatively robust external position. Gross international reserves at the end of May shot up to $93 billion from below $88 billion at the end of 2019. The latter amount per IMF assessment is over twice what the country needed to cover short-term foreign exchange needs, including for trade and debt repayments, and is among the highest in the region. (Chart 3)

2. Expectations about the country’s current account balance have changed. At the start of the year, the consensus forecast was that the current account will remain in deficit of around $9 billion (2.2% of GDP); this forecast has now turned positive or a current account surplus of $0.7 billion (0.2% of GDP). The shift is mainly driven by improved outlooks on the trade in goods deficit, with forecast double-digit contraction in imports outpacing projected fall in exports. The collapse of trade during the lockdown is quite evident in the 53% and 43% drops in imports and exports, respectively in April-May that saw the cumulative five-month trade gap shrink by over 40%. The difficulty of restarting economic activity with local COVID-19 infections still rising is likely to mean more modest import recovery ahead and a better current account position; notwithstanding expected declines in remittances and tourism earnings.

3. Although risk-off sentiments have led to a withdrawal of portfolio investments by over $3 billion in the year to May, dollar inflows from foreign borrowings, both public and private, have provided offsets. Government in particular raised the share of external financing in its higher borrowing program to minimize the risk of higher domestic interest rates. In the year to May, government’s external debt has risen by more than $5.2 billion following increased borrowings from multilateral lenders and a $2.3 billion global bond issuance. Additionally, a number of private firms, banks and nonbanks, have also decided to tap the external commercial bond market, bringing in more dollar flows.

Back in May when we were preparing our quarterly report, we had forecasted the peso to depreciate and approach P52/$ by year end. Yet since June, it has gone the other way and has consistently fallen below P50/$ since late June. Indeed, the peso may continue to linger below P50/$ in the near term given the current economic environment and additional planned external borrowings ahead by several private firms; but we do not think it can appreciate much more from current levels. We expect the BSP to intervene in the event, especially with certain sectors calling for a more active foreign exchange policy to weaken the peso to help overseas workers and their families. Too, we recall that Governor Diokno, in his past life in the academe, had advocated for the BSP to adopt a deliberate competitive exchange rate policy to support the export sector.

As it is, the peso had already appreciated by over 5% in real effective terms as of June. With these in mind, we think that when imports start firming up later this year, the peso will likely reverse course to settle above P50/$ by year end.

 

Romeo L. Bernardo was finance undersecretary during the Cory Aquino and Fidel Ramos administrations.

romeo.lopez.bernardo@gmail.com

Support the doctors

Oh, mother, mother, I am sick,
Call the doctor very quick!
Doctor, doctor, shall I die?
Tell my mama do not cry

— Yoyoy Villame’s
variation of
a kindergarten song

Our people are getting sick and dying because of COVID-19. Our health system is on the verge of collapse. We are experiencing a new surge of transmission, which could make our urban areas suffer the catastrophe that Italy and New York City went through.

Whom do we call? Whom do we believe? The politician? The general? The businessman? Everyone has an opinion, but the doctor’s word ultimately carries the most weight.

Last weekend, on Aug. 1, doctors banded together in a press conference to present an appeal to President Rodrigo Duterte for a “return to Enhanced Community Quarantine (ECQ) in Mega Manila” for a period of two weeks. So far, 98 medical associations nationwide, and counting, have signed the letter of appeal.

Media organizations tend to highlight the call for a return to ECQ. But the main substance of the medical community’s message is how “to recalibrate strategies against COVID-19.”

The ECQ is necessary not only for the overwhelmed and exhausted health system to recover but also for the whole of government and the whole of society to regroup and build a consensus on the strategies to contain COVID-19.

In other words, the ECQ by itself is insufficient. The ECQ’s role is to wake up the nation, agitate the nation to act as one in pursuing the ideas and practices that work and abandon those that do further harm.

The doctors have outlined the areas that need “recalibration.” To wit: 1) hospital workforce deficiency, 2) failure of case finding and isolation, 3) failure of contact tracing and quarantine, 4) transportation safety, 5) workplace safety, 6) public compliance with self-protection, and 7) social amelioration.

Government is in fact aware of these issues. The problem lies in the weakness, if not failure, of execution. This brings to fore the role of governance and leadership. The statement of the doctors does not dwell on this, but the proposed “recalibration” of strategies around the seven areas enumerated above suggests a rethinking of leadership and governance.

Here, I present some ideas on leadership — in fact, ideas articulated many times over. It is an attempt to tackle the bull by the horns. I may miss other equally important elements, but my intention here is to push the limits of the appeal of the doctors.

First, the communications strategy is a strategy in itself. The war against COVID-19 cannot be won without a lucid and credible communications strategy. Transparency is also embedded in an effective communications strategy.

The recent example of failed communications was the knee-jerk response of Presidential Spokesperson Harry Roque to the appeal of the doctors. The doctors were still having their press conference when Mr. Roque issued a statement that thumbed down the call of the doctors to restore ECQ. Hours later, he took back his earlier pronouncement and said that the Palace would take up the recommendations of the doctors.

Another example of confused messaging, as observed by The Asia Foundation’s Jaime Faustino, is the government’s fixation on acronyms that are indistinguishable to the public. ECQ, GCQ, MECQ and the like make an alphabet soup that is not at all tasty.

Worse, the government becomes the purveyor of fake news. The President’s statement that gasoline can disinfect facemasks is no joke.

On matters relating to public health, let the Department of Health (DoH) do the talking. But even here, the DoH has shortcomings. The noise over the “mass recovery adjustment,” wherein tens of thousands COVID-19 patients were instantly categorized as recovered, could have been avoided. The DoH at the outset could have explained to the public the change in the criteria, consistent with international practices.

Arguably, to boost credibility, the DoH must have a Pinoy Anthony Fauci as the government advisor on the pandemic but who has the independence to call out leaders when they are wrong.

Second, the government suffers from the lack of an integrated over-all command, resulting in the breakdown of policy execution as well as policy inconsistency.

Take the case of contact tracing. The DoH had approved a strategy for contact tracing months ago. It also laid out the plans for an intensified house-to-house campaign in communities with clusters of infection to screen, test, trace, and quarantine. The implementation of this, however, rests on the Department of Interior and Local Government (DILG) and local government units (LGUs). Weeks have passed, but the DILG and LGUs have not moved this strategy.

The best illustration of policy inconsistency is about the issue of rapid antibody tests (RATs). The DoH and expert advice, both locally and nationally, have warned about the inappropriate use of RATs. RATs cannot be used to screen and diagnose people for COVID-19. This test yields a high number of false positives and false negatives. Their use is limited to determining serological prevalence (but even at the height of the pandemic, estimating serological prevalence is difficult to do technically). Yet, till now, some agencies and LGUs continue to use RATs for testing. The inappropriate use of the unreliable RATs has contributed to the virus spread.

The bottlenecks in policy implementation and the policy inconsistencies can be avoided by having an integrated command and an integrated strategy. But having “tsars” outside the DoH ambit, like the contact-tracing tsar and the testing tsar, and allowing LGUs to make their own rules that contradict DoH guidelines have exacerbated this problem.

The flow of decision-making in the Inter-Agency Task Force (IATF) itself is not clear either. Seeing the IATF’s organizational chart is like admiring Imelda Marcos’s doodle. The bottom-line is that the decisions and accountability rest on the different departments.

In truth, despite all the shortcomings of the DoH, it has demonstrated that it can execute good plans and strategies. It has shown this in the recent highly successful campaign to defeat the polio outbreak.

In this light, it is high time Secretary Francisco Duque moved from being the IATF’s chairman of the board to being a general in command of a field army that is the DoH.

Together with the support of the medical associations, the DoH can get a renewed boost. All of us must take in earnestness a whole-of-government, whole-of-society approach to fight COVID-19. Let’s heed the appeal of the doctors, and transform the crisis into an opportunity to put in place the institutional and policy reforms to beat COVID-19.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

The state of e-commerce in the Philippines

The Philippines has a consumer-driven economy where 72% of economic output is attributed to private consumption. For decades, Filipino entrepreneurs have benefitted from brick and mortar stores. But all that changed when the Wuhan virus struck. Overnight, bustling restaurants, crowded malls and busy stores were empty. Retailers today only realize 15% of their pre-COVID sales, on average.

For local businesses, the obvious strategy for survival is to pivot to e-commerce. That’s where all the action seems to be. But before plunging into the online sphere, it is important to understand the state of the industry and the dynamics at play. This is what this piece hopes to provide.

Filipinos have the distinction of having one the highest internet penetration in the region and being the most active on social media. More than 73 million Filipinos are registered internet users and 99% of them are active on one social media platform or another. The average Filipino spends a whopping nine hours and 45 minutes on-line daily, three hours and 53 minutes of which is spent browsing social media sites.

Despite being highly connected to the worldwide web, mystifyingly, Filipinos have not been quick adaptors to e-commerce. Prior to the pandemic, statistics show that only 2% of Filipino netizens have purchased goods or services online, compared to 10% of Thais, 9% of people in Hong Kong and Taiwanese, 6% of Vietnamese, 5% of Singaporeans and Indonesians, and 4% of Malaysians.

Perhaps due to the discomfort of divulging financial information online or misgivings over the reliability of e-merchants, Filipinos have been skeptical about spending money on the internet. But this changed during the five month-long quarantine. Home confinement left Filipinos no choice but to purchase food and other essentials on the internet. This triggered an explosion of e-commerce transactions.

Filipino entrepreneurs were quick to pick up. Suddenly, thousands of entrepreneurs established their own e-commerce stores, selling anything from face masks to adobo. Big businesses have doubled-down on their e-commerce efforts too. The likes of SM, Rustan’s, and Store Specialists have upgraded their systems to better serve the online community. Confidence on the safety and reliability of e-commerce has been growing steadily since the quarantine began.

Studies show an inverse correlation between mobility and e-commerce. The lower the mobility, the higher online transactions become. Last April, mobility was down by 90% and this resulted in a sharp spike in online transactions. As of July 5, mobility was still down by 57% compared to pre-COVID levels. Thus, for as long as the quarantine persists, e-commerce will grow by leaps and bounds.

What exactly is the prognosis for the e-commerce industry in the Philippines as we move forward? Paulo Campos III the CEO of Zalora Philippines shared some insights.

According to Campos, as many as 91% of Filipino internet users searched for goods and services to purchase during the quarantine period. Of all those who searched, 76% consummated the transaction. This is a clear indication that Filipinos are finally warming-up to e-commerce. From a sales turnover of $500 million in 2015, e-commerce in the Philippines is seen to top $12 billion by the year 2025. It already realized $3 billion in 2019. In the first six months of 2020, growth has already doubled in terms of number of buyers and the peso value of purchases, when compared to 2019.

A survey conducted by Global Web shows that 48% of Filipinos plan to do more online shopping after the pandemic is over. Whereas during the pre-COVID era, fashion apparel, sporting goods, and footwear were the best sellers at 54%, 18%, and 10% of the sales mix respectively, a new category has emerged in the post-COVID era. Nowadays, essentials that include personal protective equipment, sanitary goods, and groceries have emerged as brisk sellers. In just four months, essentials now comprise 6% of Zalora’s sales mix. This is why the country’s biggest internet merchant is adding more food and grocery items to its product offerings.

Time spent at home has caused consumers to delay many non-essential purchases. This has led to pent-up demand. A recent survey indicates that when the Filipino is able, he will prioritize purchasing clothing at 19%, home appliances and devices at 18%, home furniture and accessories at 15%, electronic gadgets at 15%, and smartphones at 11%.

In terms of demographics, 72% of Filipino online shoppers are female while 28% are male. Age-wise, 45% are between 25 to 35 years old, 22% are between 18 to 24 years old, 16% are between 35 to 44 years old, and 17% are 45 years old or older.

Geographically, 38% of all e-commerce transaction occur in Metro Manila, 9% in Cavite and Laguna, 6% in Cebu, 6% in Pampanga and Bulacan, 3% in Davao, 3% in Rizal, 2% in Iloilo, and 2% in Batangas. The rest of the regions are too small to be categorized.

Cash on delivery is still the preferred mode of payment comprising 67% of all transactions. This is followed by credit cards at 24%. Paypal has a 5% share of payment transactions while G-Cash has a 2% share. A massive 79% of all e-commerce transactions are consummated over the smartphone.

There is no doubt that the retail business will take a new shape in the post-COVID world. We already see it — dining-in in restaurants, shopping in stores, and wandering in malls are practices we try to avoid for fear of being infected. People are beginning to discover that working and playing at home have its unique merits. As seen with the statistics above, the Filipino is becoming more comfortable with buying goods and services online. This trend will continue.

E-commerce is now in the mainstream. Its share of wallet will only grow larger in the years to come, with or without a vaccine.

This is why it is important for every business to establish their own e-commerce platform. It is a race. Those who pivot fastest and those who can ensure safety and reliability of transactions, wins.

 

Andrew J. Masigan is an economist

COVID-19 brings out the worst in Brazilian elites

By Mac Margolis

WITH THEIR COUNTRY second only to the United States in COVID-19 infections and deaths, Brazilians might be grateful to the public officials whose job it is to keep them out of harm’s way. Not so Eduardo Almeida Prado Rocha de Siqueira, an appellate court judge with a flair for public scenes and a track record of bullying civil servants.

Siqueira was overheard earlier this month in Santos, a beach town, twice quarreling with municipal guardsmen who had stopped him for failing to wear a face mask outdoors, per a town decree handed down in May. The judge took umbrage, called one guard an illiterate, tried to humiliate another by speaking French, and pulled rank by phoning the municipal public safety secretary. When none of that worked, Siqueira tore up the fine and threw the scraps to the pavement.

It was shabby behavior, not least because it was so familiar.

“You might be a macho in the slum, but here you’re s—,” a São Paulo jeweler snarled at the patrolman dispatched to answer a domestic abuse call in a tony gated community in May. It’s much the same among Cariocas, or Rio de Janeiro denizens, whose high-enders have little use for public health diktats, especially if it’s a happy hour. “Citizen, no!” one woman lectured the municipal health inspector who addressed her husband by that inconceivably equalizing appellation while attempting to enforce social distancing in early July at an overcrowded bar. “Civil engineer. With a diploma. Better than yours.” (No matter that the inspector held a doctorate in veterinary medicine; for entitled Brazilians, all public servants are underlings.) Call it noblesse desoblige.

From Albert Camus’s pestilent Oran — “where poor families were in great straits, while the rich went short of practically nothing” — to Hawaii’s pandemic-driven spike in luxury getaway home sales, microbes have never been democrats. The reaction to the deadly disruption in Brazil shows that what’s wrong in society can always get worse and that, even in dire times, rules are for wimps and nobodies.

Anthropologist Roberto DaMatta nailed the problem in a classic study about one of Brazil’s defining infirmities, closet authoritarianism, best expressed by the pugnacious phrase “Do you know who you are speaking to?” DaMatta published his essay in 1978, the darkest moment of military dictatorship. Compare that phrase, DaMatta says, with the equally iconic yet belligerently democratic comeback so popular in the US: “Who do you think you are?” The mystery is why, more than three democratic decades on, Brazilians cling to such authoritarian ways and balk at embracing equality before the law.

Credit coronavirus for sending the country back to the bookshelf. “I’ve never given so many interviews,” DaMatta, who is 84, told me. He’s not just talking about Brazil’s handful of little emperors, but a culture still channeling its inner peacock.

Each weekend since early July, when Rio officials began easing social distancing orders, I have watched merrymakers throng the low stone wall girding my seaside neighborhood of Urca. So densely packed is the maskless swarm sharing beer and backslaps that only the arrival of a convoy of police cars, sirens and bullhorns blaring, can disperse the folly. There’s a direct path from my neighborhood wall of scofflaws to the arrogant magistrate in Santos and the Brazilian denialist in chief President Jair Bolsonaro, who so ridiculed COVID-19 safeguards that he caught the virus himself and touted medically discredited hydroxychloroquine for the fellow infirm.

Fortunately, Brazil also has shown some encouraging vital signs. No sooner do the entitled demophobes indulge their demons than vigilant onlookers catch their tantrums on smartphones — “instruments of transparency,” DaMatta says — and turn them into shaming memes. The result? The fine-shredding judge apologized after being placed under investigation by his fellow magistrates. The choleric jeweler also posted a lengthy mea culpa, donning a mask and blaming his outburst on alcohol and prescription medication, while Rio’s happy-hour insurgent was fired for unseemly behavior.

Meantime the civil servants they accosted have become celebrities, feted on social media and booked for comment on newscasts, while the aggrieved São Paulo cop and his partner have filed hefty moral damage suits against the jeweler.

Brazil can do better. This is the land of the Carwash investigation, Latin America’s biggest crackdown on political corruption, which at its best showed that even the high and mighty must answer to the law. It also turned that cleansing democratic moment into a cult, where lordly prosecutors overstepped their brief to become avengers as if to “purify the country,” O Estado de São Paulo said in a lead editorial this week. “Brazilians haven’t decided who we want to be, aristocrats or egalitarians,” said DaMatta. “We modeled our state on ideals imported from the US and Europe, but failed to adopt the corresponding practices of individual responsibility and the rule of law. Instead Brazilians prefer to hide behind ambiguity.”

It will take more than smartphones to sort that out.

BLOOMBERG OPINION

Boris Johnson’s desperate change of direction on coronavirus

By Therese Raphael

BACK IN APRIL, Britain’s Deputy Chief Medical Officer Jonathan Van-Tam told a news conference that the UK’s relative performance in combating the coronavirus would become clear only once there were comparative figures on excess mortality (deaths above a five-year average). Shortly afterward, the government stopped showing charts with comparative death rates altogether.

It wasn’t hard to see why: The emerging trends were deeply unflattering to Britain. But Boris Johnson’s administration also had a point. COVID-related deaths are recorded unevenly across countries, making comparisons difficult. Pressed on the issue, the prime minister said there would be time for drawing conclusions about relative performance later and he promised an independent investigation.

On Thursday the UK Office of National Statistics (ONS) released a trove of excess mortality data that allow more reliable comparisons to be made. The ONS got around the comparability problem by using total mortality figures, rather than simply COVID-related deaths, and drawing on data from Eurostat, which sets out clear criteria for reporting.

The data confirmed the picture the government was eager not to highlight in those charts: England had the highest excess mortality rate in Europe. Understanding why the government made the decisions it did as the pandemic arrived in Europe will occupy journalists, historians, and Parliament for many years. The data can’t provide those answers, but they do give an indication of how Britain can better arm itself in fighting a second wave, or preparing for the next virus.

It will be unforgivable for the government to again drag its feet on lockdowns, ignore what’s happening elsewhere in Europe, and not prepare adequately for a medical emergency. Late on Thursday, Health Secretary Matt Hancock surprised many with new lockdown restrictions on a large swath of northern England, including Greater Manchester. The new mantra seems to be “better safe than sorry,” although the timing and lack of clarity about the data used for the decision have created confusion that won’t help with getting people to comply.

What made the UK the most deadly place for COVID wasn’t big spikes in mortality in badly hit cities or regions. Some places in Italy and Spain suffered worse. In Bergamo, the peak of deaths was 857% the normal rate; in Madrid it was 432%. Brent in London had the highest UK peak at 357% of the usual level.

The real killer in Britain — literally — was that excess mortality continued longer than in any other European country. That may reflect the lockdown-lite policies Johnson pursued in the early stages. Britain’s slowness in shutting things down and its less stringent rules allowed the virus to spread faster and farther, making it harder to suppress.

The UK’s excess mortality rates were also more geographically dispersed than in most of western Europe. That could be due to a number of factors. Travelers returning from Europe and Asia to various parts of Britain faced no quarantine restrictions in the early stages of the outbreak and could have easily brought it home.

That the spike in deaths happened all over the place also reflects public health problems peculiar to the UK, especially high levels of obesity and weight-related disease. That conclusion is borne out by another piece of ONS data — excess deaths among people under the age of 65. Here again, Britain ranked worst.

While England is singled out for particular shame, Scotland, Northern Ireland, and Wal es also scored poorly, suggesting similar missteps and vulnerabilities. That provides some political ammunition for Johnson as he battles to hold onto Scotland, where the governing Scottish National Party has argued its superior handling of the pandemic shows the nation is better off on its own. Scotland’s excess deaths were higher than Italy’s.

Dealing better with future strains on the health-care system will be paramount. A study published Thursday from researchers at Sheffield and Loughborough universities, along with Economic Insight, estimates that some 21,000 UK deaths can be attributed not directly to COVID-19 but to the lockdown, and especially lack of access to critical medical care. The purpose of the lockdown was to “flatten the curve” of coronavirus cases to prevent the National Health Service from being overwhelmed, but any new strategy will need to make sure there’s adequate care for people with other serious conditions too.

Johnson’s government seems to now recognize the need to rapidly impose travel quarantines and partial local lockdowns. On the same day the ONS data were released, the UK had its highest daily total of coronavirus cases for more than a month and it added another country to its quarantine list — Luxembourg joins Spain among the recent additions. Johnson said infection rates were “bubbling up” in 30 areas across the country.

The regional lockdowns, quarantines, mask-wearing orders and other policies show a government desperate to avoid repeating its mistakes from the start of the pandemic, when it fatally ignored the policies that had proved effective in other countries. Johnson’s campaign to tackle obesity and the dysfunctional social care system are other signs that he wants to strengthen the country’s defenses. The ONS data show the tragic price Britain paid for those early lessons to be heeded.

BLOOMBERG OPINION

Australia’s Victoria declares state of disaster as coronavirus cases spike

AUSTRALIA’s Victoria state tightened restrictions and declared a state of disaster after its outbreak showed no signs of abating three weeks after capital Melbourne was put under lockdown.

State Premier Daniel Andrews announced 671 new cases in the past 24 hours with seven deaths. More than 380 people were in hospital, with 38 in intensive care.

Mr. Andrews said he would declare a state of disaster from 6 p.m. tonight, which would give police added powers. Metropolitan Melbourne would be under a curfew limiting movement between 8 p.m. to 5 a.m. The new restrictions will be in force for six weeks.

Mr. Andrews said it was “not acceptable” to face the state each day and report the numbers of residents who had died. “We need to come down on this hard.” He said the number of mystery cases that couldn’t be traced to a known outbreak had risen to an “unacceptably high” level that could not be continued.

Regional Victoria will be under restrictions that Melbourne is currently under from Wednesday night, Mr. Andrews said. Schools across the state will move to remote learning from Wednesday, while childcare centers in Melbourne will close to all but essential workers from Thursday.

Half-way through a six-week lockdown, the infection curve in Victoria hasn’t flattened. Yet the tighter restrictions threaten to exacerbate Australia’s first recession in almost 30 years. Victoria contributes about one-quarter of gross domestic product, but is now isolated from the rest of the country as other states shutter their borders against a worrying spike in community transmission.

Separately, New South Wales — the nation’s most populous — recorded another 12 cases, Sunday, with Premier Gladys Berejiklian “strongly encouraging” residents to wear masks in certain situations, such as supermarkets and places of worship.

“I want to stress it’s not compulsory, but it is a strong recommendation,” Ms. Berejiklian told reporters on Sunday. “I can’t stress enough how critical the next few weeks are,” adding she was taking extra measures due to the state’s geographical proximity to Victoria.

Australia’s first lockdown that lasted roughly from March to May was one of the most successful in the world, bringing down cases to just a handful a day nationwide. But security failures at quarantine hotels for returning travelers and poor communication of critical information to migrant communities allowed the virus to roar back in Victoria, its second-most-populous state.

With those unable to work from home not willing to sacrifice wages, and young people especially losing patience with physical isolation, many no longer seem willing to fully follow the rules as the economic and social costs mount. — Bloomberg

Japan’s Suga sees difficult balance between virus fight, economy

Japan is trying to both contain a resurgence of the coronavirus outbreak and support the economy, especially the tourism sector, according to Chief Cabinet Secretary Yoshihide Suga.

Striking a balance is “extremely difficult,” Suga said Sunday on public broadcaster NHK, adding the government is helping businesses avoid bankruptcies through virus relief measures such as special loan programs. The government will maintain a travel campaign that excludes Tokyo to support domestic tourism, a key growth driver for regional economies, he added.

After its initial success in containing the first wave of Covid-19, Japan recently has had a spike in the number of new infections. Tokyo announced a record number of new coronavirus cases for a third straight day on Saturday, with an additional 472 infections. — Bloomberg

Lowry nets 33 as Raptors cruise past LA Lakers

TORONTO RAPTORS guard Kyle Lowry (7) shoots the ball against Los Angeles Lakers guard Kentavious Caldwell-Pope (1) during the second half at The Arena.  — ASHLEY LANDIS/POOL PHOTO VIA USA TODAY SPORTS

KYLE LOWRY had 33 points, 14 rebounds and six assists, leading the Toronto Raptors to a 107-92 victory over the Los Angeles Lakers on Saturday at The Arena near Orlando.

Lowry hit five of nine 3-pointers and eigth of 16 shots from the floor. OG Anunoby had 23 points, making eight of nine shots, and Pascal Siakam contributed 15 points and nine rebounds for the Raptors. Fred VanVleet had 13 points and 11 assists.

LeBron James led the Lakers with 20 points and 10 boards. Kyle Kuzma chipped in 16 points but Anthony Davis managed 14 points on two-of-seven shooting. Dion Waiters added 12 points, while Alex Caruso finished with 11.

The Raptors beat the Lakers for the 11th consecutive time. They haven’t lost to Los Angeles since Nov. 30, 2014.

Toronto (47-18) used a 10-0 run in the fourth quarter for 93-83 lead after a dunk by Anunoby and a 3-pointer by VanVleet with 4:52 left. Los Angeles (50-15) sliced the margin to seven before Toronto pulled away.

The Raptors opened the third quarter on a 22-6 surge for a 63-50 advantage after a bucket by Lowry at 4:36. The Lakers cut the gap to six on two occasions but a 3-pointer by VanVleet put the Raptors up 70-61 with 1:51 remaining in the third.

A 9-2 run sparked by Kuzma’s 3-pointer and a basket inside by James pulled the Lakers within 72-70 heading into the fourth quarter.

The Lakers trailed by as much as 13 in the first half before rallying for a 44-41 lead at the break. Both clubs struggled offensively in the first half. Los Angeles shot 39% to 35.7% for Toronto from the floor. The Lakers managed 4 of 18 on 3-point attempts compared to 5 of 19 for the Raptors in the first half.

Overall, the Raptors converted 42% of their shots to 35.8% for the Lakers. Toronto made 14 of 34 3-pointers, while Los Angeles hit 25.6%.

PACERS RALLY TO DEFEAT 76ERS
T.J. Warren scored a career-high 53 points to lead the Indiana Pacers past the visiting Philadelphia 76ers 127-121 on Saturday near Orlando.

Warren was 20-of-29 from the field, including 9-of-12 from beyond the 3-point arc. Warren’s previous career-high was 40.

Aaron Holiday had 15 points and 10 assists and Victor Oladipo added 15 points for the Pacers, who improved to 40-26 despite playing without key injured players such as Domantas Sabonis and Malcolm Brogdon.

Oladipo had missed the previous 52 games with knee and quad issues.

Joel Embiid was spectacular for the Sixers (39-27) with 41 points, 21 rebounds, four assists and three blocked shots. It was his fourth game this season with at least 30 points and 15 rebounds. Tobias Harris scored 30 points and Ben Simmons added 19 points and 13 rebounds.

The Pacers overcame an early eight-point deficit and raced to a 35-29 lead at the end of the first quarter. — Reuters

National Basketball Association relieved to have been able to restart season

By Michael Angelo S. Murillo, Senior Reporter

THE National Basketball Association (NBA) successfully restarted its season on Friday, bringing relief and excitement to the league, especially after putting much effort in making it a reality and overcoming challenges in the run-up.

Suspended its 2019-2020 season on March 11, the NBA resumed activities in a “bubble” setup at Walt Disney World in Orlando, Florida, on July 31 (Manila time) with the end view of completing what was an excitement year of basketball for the NBA until the coronavirus disease 2019 (COVID-19) put everything to a stop.

In the NBA campus, the 22 teams who qualified to resume their season will each play eight seeding games over the next two weeks. Said games will determine the playoff standings, with a possibility of a play-in series between the No. 8 and No. 9 seed of each conference if the ninth seed is within four games of the eighth seed.

After that the postseason starts in a traditional format, with seven-game series in each round until a champion is crowned.

In a global media call last week, NBA Deputy Commissioner and Chief Operating Officer Mark Tatum shared that where the NBA is right now with the restart is something they are happy about and highlighted that it is a direct result of much planning and cooperation, particularly in ensuring the safety and health of all those taking part in it.  

“I think when you’re trying to do business in a pandemic, it’s all about safety and health, first and foremost,” said Mr. Tatum.

He went on to say that as they went about planning for the restart it was not easy as COVID-19 was new to everybody and presented so many challenges.

Mr. Tatum shared much of the planning centered on understanding the virus and finding ways to weave through it.

The process started, the NBA official said, even before they made the decision to suspend the ongoing season in March.

“I’d say the hardest part was the medical and the health and safety protocols. That was the hardest part, because we were not going to go forward if we didn’t come up with a plan that we felt very, very comfortable with that would keep everybody safe and everybody healthy. And so that took months and months and months of conversations, of trying to build something that’s never been built before, and doing it in a way where we had confidence that we could keep people safe,” Mr. Tatum said.

“… And by the way, one of the reasons I think we were so ready at the time and pretty decisive on March 11th [in suspending] is because we had spent two months before that trying to understand the virus. As you all know, we have a very significant presence and business in China, and when the virus hit China first, we have several offices in China, and our offices were affected by that. And so we actually started then to understand the virus, understand its impact…” he added.

Since restarting the season, no positive tests have been reported in the bubble.

While they have been successful in having the season to restart, Mr. Tatum underscored the need not to be complacent and the sporting community in general has to continue working together in dealing with the pandemic.

“There’s still a lot to learn about the virus. In this particular scenario, we’re not competing with each other, but we’re competing together to fight the coronavirus, and I think if there are learnings here that we can share with others so that we can create safe and healthy environments for athletes and for sport, we have to do it,” he said.

“We have to do it because I think that the world is a better place when there are sports, when there’s competition, and we have a collective responsibility to be able to do it in a safe and healthy way…”

UP sees addition of Tamayo, Abadiano as a big boost to Fighting Maroons

LAST weekend the University of the Philippines (UP) Fighting Maroons welcomed the good news of UAAP juniors standouts Carl Tamayo and Gerry Abadiano committing to take their talent to Diliman for their collegiate careers.

Played high school ball at the Nazareth School of National University in the University Athletic Association of the Philippines (UAAP), Tamayo and Abadiano surprised many when they decided to make the jump to UP after helping the National University (NU) Bullpups to much success during their stay with the team.

Both players shared the opportunity to get an education from the State University as one of the key factors, apart from the school’s basketball program, in deciding to play for the Maroons.

“It’s one of my dreams to study in UP. Education is one of my reasons for picking the school and, of course, the basketball program,” said Tamayo, enrolled as a BS Sports Science major.

“I’m so happy because, as Carl said, UP is my dream school as well. It’s not only about playing basketball but also getting a good education. Basketball is not forever and we really don’t know what will happen after that. It will go a long way if you have a good education to fall back on,” Abadiano, who is taking up BS Tourism, for his part, said.

Getting the commitment to play from the “super juniors,” UP Coach Bo Perasol said they are very thrilled to have the players in the Fighting Maroons’ fold, seeing them as valuable additions to the team and what it wants to accomplish in the UAAP.

“We are very happy to have Carl and Gerry in our team. Coming straight out of high school, they have five full playing years with the team. They will really be a big boost for our young team which is again in the process of rebuilding,” said Mr. Perasol.

In the UAAP last season, 6’7” Tamayo was steady with norms of 11.6 points and 9.3 rebounds in the elimination round. In the finals, he took his numbers to several notches higher with double-double averages of 19 points and 18 rebounds en route to winning the Finals most valuable player award and the championship for the Bullpups.

Guard Abadiano, meanwhile, averaged 11.27 points, 3.2 rebounds and 2.33 assists for NU.

Tamayo and Abadiano suited up for Gilas Pilipinas in the 2019 FIBA U19 World Cup and they are the latest to join the Fighting Maroons in addition to Jancork Cabahug, RC Calimag, Sam Dowd, Ethan Kirkness, and Miguel Tan as well as transferees Joel Cagulangan and Malick Diouf.

In UAAP Season 82, UP reached the Final Four for the second straight year. The team lost six players to graduation last season and has five players with one playing year left. — Michael Angelo S. Murillo

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