In Logistics

Mexico, Costa Rica and Chile were the first nations in Latin America to kick off their vaccination campaigns in December 2020. The LAC region, home to 650 million people, including 71 million over the age of 60, will require more than 250 million doses just to vaccinate their critical segments (elderly, emergency workers, teachers and those suffering from pre-existing conditions).  As of the end of March, over three months into its vaccination drive, LAC countries have deployed a little over 50 million vaccines, or roughly 20% of its critical population goal and less than 10% of achieving herd immunization.  At first, vaccine manufacturing snafus were blamed for the slow progress.  Increasingly, the blame will fall upon inadequate end-to-end logistics. 

AMI’s analysis has identified three key obstacles holding back an accelerated vaccination drive in Latin America in 2021.

  1. A limited capacity to produce vaccines locally
  2. Tight budgets for imported doses
  3. Inadequate cold chain infrastructure

Below we highlight some key effects these obstacles will have on LatAm logistics in 2021.

2021 Latin America Outlook

2021 Latin America Outlook

Which countries and industries will recover first—and why

#1 Tighter air freight capacity

Most countries in the region, except Mexico, Brazil, and Argentina, lack the capacity to produce their vaccines locally and depend on imported doses. Smaller (and poorer) LAC markets depend upon supplies from the Covax multilateral initiative, organized by the World Health Organization.   At the end of January, 2021, the WHO forecasted that 36 Caribbean and Latin American states will receive 35.5 million doses of AstraZeneca’s vaccine, and four nations (Colombia, Bolivia, Peru, El Salvador) will receive 377,910 doses of the Pfizer vaccine between mid-February and June. Many of these countries have also negotiated deals with pharmaceutical manufacturers to supply more doses as production ramps up, something that will likely trigger a spike in demand for cold chain air transport to Latin America throughout 2021 and into 2022.   Evidence of this demand is the anticipated surge of charter services to augment existing capacity. 

Brazil’s delays in launching local manufacture of Sinovac’s and AstraZeneca’s vaccines will reduce how many vaccines Brazil can export to neighboring countries this year.  Suffering the world’s worst death and hospitalization rates at present, there is intense political pressure in Brazil to divert all production to the domestic market, even at the risk of dishonoring contracts with close allies.  This puts added pressure on international logistics firms to bring production from the US, India, China, Russian and Europe into Latin America’s 2nd tier markets.  With 1/3 of international commercial capacity still grounded, air freight rates continue to climb.  According to the International Air Transport Association (IATA), the world needs 8,000 jumbo jets with a 110-ton capacity for the airlifting of 14 billion vaccines over the next two years.

#2 Working around cold chain capacity constraints

Cold chain infrastructure is a linchpin in the distribution of the most effective (and popular) vaccines.  The Pfizer vaccine must be stored at below -70°C, which very few logistics providers in Latin America can handle. Existing cold supply chain carriers in the region normally transport medical supplies between 2°C and 8°C, which is suitable for most of the new vaccines historic vaccines (which are typically stored at around 4°C).  Moderna’s -20°C and Sputnik’s -18°C storage requirements can be handled by most hospital freezers and some logistics providers.  But the COVID vaccines that can withstand ‘normal’ refrigeration are the ones that Latin America will likely have to adopt, especially outside of its tier one cities.  Unfortunately, they are less popular among the voting public.

As Carlos Neuhaus, the businessman appointed by the Peruvian government to oversee vaccine distribution, said in December 2020, “The Pfizer vaccine is easier to distribute in Lima and Peru’s largest cities, but in rural and small-town Peru, other vaccines will be needed that don’t require cold chain infrastructure.”  The need to differentiate geography and vaccine brand only adds another layer of complication to planning and delay to deployment.

#3 Security threats from robbery and counterfeiting

Cargo theft by criminal organizations is a frequent practice in Mexico, Brazil, El Salvador, and Colombia. News involving organized criminals stealing trucks carrying LSH equipment to sell on the black market is lamentably common in the region.  Given the understandable clamor over vaccines, the risk of theft is even higher.  Pharmaceutical and logistics firms are bracing for enhanced security threats by using military escorts for their last mile delivery (to hospitals and other deployment points) as well as beefed up protection of logistics distribution hubs.  In Mexico, for example, DHL partnered with the Navy (considered the most professional branch of the Mexican armed forces) to secure its last-mile operation.

Even before vaccines arrived, organized crime was selling counterfeited COVID vaccines on the Dark Web. At the beginning of December, Interpol issued a global alert on possible criminal activities related to counterfeiting, theft, or illicit COVID vaccines advertising. According to IATA, the likelihood of vaccine tampering, the production of counterfeited doses and attempts to disrupt the distribution are most acutely anticipated in Latin America, above other all other regions of the world.

#4 Last-mile risks

The delivery of vaccines to their deployment points (hospitals, clinics, retailers) is the riskiest portion of end-to-end logistics.  As discussed, this is where security is most exposed and also where cold chain infrastructure is least consistent. 

On average, more than 50% of Latin America’s refrigerated trucking is over 12 years old, rendering it obsolete and below standard for the movement of vaccines.  All hospitals and clinics can store vaccines at 2-8°C but fewer can handle the Moderna and Gamalea vaccines and very few have deep freezer capacity for the Pfizer vaccine.  The reduced supply of modern refrigerated trucking and handleing equipment will put a high price premium, such that per vaccine logistics costs in Latin America could easily be double that of the USA. 

There is not enough time to dramatically increase refrigeration equipment in time for the vaccine roll-out but logistics firms will be investing in traceability solutions to monitor the temperature of medicines and other sensitive products as they move through the supply chain. 

2021 Latin America Outlook

2021 Latin America Outlook

Which countries and industries will recover first—and why

Implications for the logistics sector in Latin America

Modern logistics and trucking companies that can deliver cold chain solutions today in Latin America stand to do very well over the next year as the prices for their services rise.  For less-equipped firms, the pressure is on to improve equipment and processes to take part in this unique opportunity.  Health experts believe that the world will need to vaccinate every year for COVID as it evolves into new strains and remains a threat to mankind.  That means that any cold chain logistics investment made today to handle vaccines will serve providers for years to come. 

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Contact us to find out more about how our Latin America logistics market intelligence services can help your company plan for and execute on your growth plan in the region. 

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