Integrating the Technical, Risk Management and Economic Implications of Animal Disease Control to Advise Policy Change: The Example of Foot-and-Mouth Disease Control in Uruguay

The analysis considered three new policy approaches to capitalise further on Uruguay’s continued FMD freedom. These were:

For each alternative policy option, an assessment was made on the impact of four different potential FMD scenarios (Table 1). The most likely scenario, given the data and information received, was no FMD, and this has been taken into account in the subsequent cost–benefit analysis (CBA). A range of mitigation measures was developed through team discussion for each control policy and scenario, with costs developed based on the MGAP Contingency Plan² and the adjustments that can be made at the time of the contingency.

For each of the policy comparisons, an assessment of prospective market access benefits and animal health service costs were derived, which were incorporated into a CBA (Fig. 1). Market access benefits were derived based on an exhaustive analysis of the prospective returns associated with obtaining higher prices and market share and access for specific cuts that would be possible under the cessation of annual FMD vaccination. This includes access for offals and certain bone-in cuts to East Asian and European markets which are currently closed to Uruguay. Additionally, implicit benefits to being FMD-free without vaccination were explored with regards to the speed of regaining market access after a FMD outbreak. There is evidence that this is faster for a country free with no vaccination than for a country that is free with vaccination.

Information on the costs of new mitigation measures was generated through data collected from MGAP, private sector stakeholders and secondary sources. Gaps were filled with consultation within the team and with key public and private sector informants in the country. These results were presented at three different workshops held in Uruguay and were validated during that period.

Information on the costs and benefits for each policy and for each FMD scenario were calculated over a 20-year period with a discount rate of 8%. To obtain an understanding of the relative value of the different policies given the uncertainty of FMD status, a state contingent approach (Adamson and Loch 2020) was adopted that allows an assignment of probabilities for each policy and FMD status to be combined with the cost–benefit analysis results.

The market analysis indicates that if Uruguay changes to a NO vaccination policy, there will be opportunities to increase income from its traded meat and livestock products. In general, direct market access benefits are positive but fairly modest, with short-term benefits estimated at over US$3 million, medium-term benefits of nearly US$6 million, and longer-term benefits of just over US$25 million annually.

While the new market opportunities are not extensive, and likely to generate relatively modest gains in export revenues, it is important to recognise that the analysis considered Uruguay in isolation from the other Mercosur countries (Argentina, Brazil and Paraguay). A Mercosur-wide cessation of FMD vaccination would undoubtedly accelerate price competition in both East Asian markets such as Japan and South Korea, as well as in China, as supplying countries would have even more flexibility in maximising carcass value through greater market access of different cuts. However, there may also be important “first-mover” advantages in accessing such markets, in terms of securing relationships and supply chains. Given that Uruguay already has inroads in these target countries and a good reputation on global markets for traceability and reliability, this suggests that there will be potential benefits from accessing these markets first through a more aggressive approach towards market access without the use of FMD vaccination.

The implicit benefits of NO vaccination by the faster re-opening of high value markets in the event of an FMD outbreak are larger. Taking the top 70% of traded products by value (US$1.24 billion of trade) as a point of comparison, we estimate that the likely value of annual exports would be US$89 million less under the Vaccination and Vaccination PLUS strategies in the event of an FMD outbreak, as compared to the NO vaccination case. Under alternative scenarios where domestic prices fall in response to the glut of goods into the domestic market, these differences widen. This suggests positive benefits from the faster re-opening of markets under a NO vaccination policy.

The cost analysis of the current FMD policy (Vaccination) estimated that Uruguay currently spends US$36.9 million on 11 different management components. These costs are split equally between the public and private sectors, and half of the costs are due to FMD vaccination. In the NO vaccination policy, annual costs are estimated to fall to US$18.8 million, but the associated risk analysis undertaken indicates that this policy would also increase the risk of FMD introduction, exposure and dissemination. Moving to NO vaccination will therefore require parallel investments in strengthened veterinary services. The NO vaccination PLUS strategy would cost less than the current FMD vaccination (as there is no cost of vaccine purchase and deployment), and is estimated to cost US$30.2 million, a saving compared to the current policy (Vaccination). The risk analysis for this option indicates that it would also reduce risks of an FMD introduction, exposure and dissemination event.

By contrast, the alternative policy of Vaccination PLUS would increase the annual costs of the programme to US$44.7 million, and also reduce the risk of FMD incursions. The overall risk of FMD was estimated to be very similar to the less expensive NO vaccination PLUS, and would provide no additional market access benefits.

It was recognised that the costs of responses to deal with an FMD incursion, be it an outbreak in a neighbouring country or within Uruguay, would be different between the policies. Costs for the NO vaccination PLUS strategy with a scenario of an outbreak in a neighbouring country were predicted to be lower than other policies, but higher for scenarios where there were outbreaks in Uruguay itself.

The net present value (NPV) results are presented in Table 2. The cost–benefit analysis (with sensitivity analysis on market access, discount rates and varying levels of risk of FMD risk) demonstrated that policies with no annual vaccination were superior and that this result was robust. The savings for these two options (NO vaccination and NO vaccination PLUS) provide a positive cash flow in all of the 20-year evaluation period. On the other hand, the vaccination PLUS strategy always generates a negative cash flow for the cost–benefit analysis. Hence both the internal rate of return and benefit–cost ratios provide no guidance to the analysis.

Given current estimated levels of FMD risk, a NO vaccination policy for Uruguay is potentially economically profitable for Uruguay. The sensitivity analysis indicates that this superiority is robust across different assumptions of market access, FMD risk or presence, discount rate and the size of a major outbreak. Additional benefits may exist in sheep meat, dairy products, and the export of live animals, among others, which were not addressed in the market analysis.

Our analysis further demonstrates benefits from switching from an animal health system focused on delivering annual FMD vaccinations to one on strengthening surveillance, improving attention to the general health and welfare needs of livestock, and improving market access for environmentally sustainable products. These benefits accrue to a majority of the people across the livestock sector and society as a whole (see Table 3).

Adapting, changing and renewing animal health policies are challenging processes, particularly when they have trade-offs and broader regional and wider international repercussions. We believe that this is the first such multi-disciplinary analysis of the socioeconomic, logistical and risk factors affecting disease control policy change in Latin America, and it arguably provides a model which could be used by other countries for FMD, for other diseases affecting trade in livestock and livestock commodities, as well as for the broader aspirations of PHEFA. The move from a vaccination-orientated system to a more holistic animal health policy will require training, education and investment (Rojas and Romero 2017). Importantly, it should not be taken as an opportunity to cut animal health budgets, but rather to invest in the animal health systems of the future in a broader and more sustainable manner.

The value of an integrated epidemiological-economic analysis has long been recognised (see for example Perry et al. 2001, 2013; Rich and Winter-Nelson 2007; Rushton et al. 2009; Rich and Perry 2011; Randolph et al. 2002), but often remain as academic exercises. We present here a practical example designed to influence policy, and one which evolved through teamwork between the designers and implementers.

The beef sector has come under increasing pressure from the environmental community and others for its contributions to greenhouse gas emissions and global warning (Steinfeld et al. 2006; Gerber et al. 2013). At the same time, there is considerable heterogeneity in production systems, with the extensive systems used in South America (and promoted by Uruguay in its value proposition to consumers), and the silvo-pastoral systems utilised in Central America and Colombia, offering a more environmentally friendly and sustainable means of production (Cuartas et al. 2014; Resende et al. 2020). Improved FMD control at continental level offers greater access to “greener” meat and potentially a basis to move competition away from price towards more intangible attributes associated with production systems. This could expand the benefits that the beef sector and its value chains provide to economic development and environmental preservation within South America.

Public–private partnerships (PPPs) enable the development of animal health services, policies and trade to a scale, quality or degree of geographic penetration that is unachievable by the public sector alone. The partnership between the three Uruguayan bodies commissioning this study presents an impressive model of a PPP in the field of animal health and trade. The FMD programme is co-financed by both public and private sectors, and this study provided a means to bring together the different stakeholders in each group to debate the strengths and weaknesses of the system in place, and to vision new disease control and livestock trading opportunities. It will be important to build on this PPP base in confronting new animal health challenges, and ensure that it is not compromised in a No vaccination policy.