Losses of R$2 Billion/Week Expected During São Paulo State Quarantine

SÃO PAULO, BRAZIL – The cost of bringing the state of São Paulo to a total standstill may cost R$2 billion per week, according to estimates by economics professor Rodolfo Olivo. The state’s governor, João Doria, has ordered the halt of all non-essential services throughout the state for fifteen days starting on Tuesday, March 24th. The quarantine, however, may be extended, leading to even greater losses.

“Sectors such as real estate, cultural, sports and education will be the most affected and may fall by more than 90 percent,” Olivo, who is a professor at FIA (Fundação Instituto de Administração), was quoted as saying to daily Folha de S. Paulo.

“Food and communication are expected to fall by 15 percent and 10 percent, respectively. The least impacted will be the transportation and postal services,” he added.

According to IBGE data, São Paulo’s net GDP (Gross Domestic Product) is R$576 billion. The services sector corresponds to the largest share, registering a net GDP of R$474 billion, followed by industry (R$59 billion), public administration (R$42 billion) and agriculture (R$37 million).

Olivo says that the services sector is expected to decline by over 18.8 percent during the quarantine. Industry should decrease by 9 percent, public administration, 25 percent and agribusiness is likely to remain stable, adds the professor.

FecomercioSP, the federation of the state’s retail and services companies, estimates a daily loss of approximately R$300 million in gross sales in non-essential trade, which includes auto parts, auto dealers, appliances, construction, furniture and decoration as well as clothing.

“We expect R$300 million per day in losses with retail completely closed. But the damage is cumulative and depends on the period of the quarantine,” says Guilherme Dieze, an economist at the Federation.

According to the entity, the quarantine should affect 117,000 stores in the state’s capital alone. These stores employ over 353,000 people.

“If stores are closed for two weeks, retailers will recover. If it extends to three months, there is a risk of dismissal, of total loss of cash, and the retailer will not return,” adds Dieze.

Sindoméstica, which represents domestic servants in the state, is concerned about a large part of the segment not being paid during this time of quarantine.

“Negotiation between the parties is necessary to avoid losses in the daily rates, because it counts on this amount. We rely on the employer’s common sense, but unfortunately in the law, there is no obligation to pay the wages if they don’t work,”says Nathalie Rosário, lawyer at Sindomestica.

On Friday, one day before the announcement of the quarantine of São Paulo state, over 40 CEOs from large companies across the state and the country sat down for a web conference, promoted by FIESP (Federation of Sao Paulo State Industries). The executives discussed a possible quarantine in several cities and states.

“The motto is serenity, right now. Confinement was the motto in China. Here we have to do as much as possible so that the virus does not pass from one place to another and confinement is essential to reduce the number of infected people, but we cannot prevent the transit of goods and people,” said Abílio Diniz, president of Board of Directors of Pensínsula Participações during the web conference.