By Pedro Santana Rodríguez – May 26, 2020
The economic management that governments have been giving to the pandemic caused by Covid-19 reflects the degree of correlation of social and political forces in each of our societies. Colombia is no stranger to this reality.
The measures implemented in the country seek first of all to alleviate at the lowest possible cost the social consequences of the measures taken to control the speed of infection and to avoid the overflow or collapse of the weakened health systems that have been privatized since the early 1990s.
As we have pointed out on several occasions, these measures have consisted of using targeted social assistance networks to distribute extremely limited monetary resources to a basic nucleus of five million households, which is very limited and frankly insufficient not only because of the coverage but also because of the derisory amount involved.
To address the problem of limited coverage, the government launched an emergency “solidarity income” program that sought to reach another three million families not in the assistance networks with an even worse subsidy of less than US$ 50, but it came up against inconsistencies in the databases that were full of irregularities such as people who had died or who, because of their income, should not be subject to this minimalist program.
The local governments mainly and the Ministry of the Interior, in view of the delays in the distribution of the limited monetary aid and the problems of coverage, decided to distribute resources that were also limited with some exceptions such as that of the Governor’s Office of the Department of Magdalena which did provide an adequate distribution in quantity and balance, but in most of the country they were poorly balanced and scarce markets with an additional problem, that they did not reach a good part of the country as the erratic Minister of the Interior herself, Alicia Arango, had to acknowledge. She pointed out that six weeks after the mandatory quarantine was decreed, the markets had not reached the Pacific coast, and blamed the National Risk Management Unit, designated by the government itself for its distribution.
Since April 27, this strategy has been joined by an element that deepens minimalism and miserliness as central elements of the government’s response. It consisted of relaxing the quarantine in two labor-intensive sectors, the construction industry and the manufacturing industry, which employ some 7.5 million workers.
Aware of the risks of a social explosion due to the lack of food and humanitarian assistance for the most unprotected sectors, which are the ones that try to live informally, which according to Garay & Espitia amounts to at least 50% of the total workforce, while the National Department of Statistics, calculates a rate of informality of 62% and with a public expenditure that does not reach 2% of the GDP, several analysts place it at 1.7% of the GDP that adds up to all the approved assistance, the government loosened the quarantine authorizing the economic reactivation in the two mentioned sectors.
Subsequently, it has continued with the flexibility in going in two directions; authorizing the entry to work in other sectors such as wholesale, furniture producers, automotive industry, computer products, manufacture of machinery and industrial equipment, vehicle repair shops, and other retail activities. And it prepares the protocols for sectors of commerce and activities such as hairdressing and beauty salons, which in our country are all intensive in the use of labor. This has been done without random testing of the population to identify asymptomatic carriers and the actual progress of the pandemic in the population that has been growing significantly in some regions of the country.
The other part of the strategy has been to relax the quarantine in about 800 municipalities that have not presented proven cases of Covid-19, but the fact that they have not been registered does not mean that they do not exist, since, as I already mentioned, no diagnostic tests have been carried out in those territories. These measures are risky and disregard the legal mandate to take into account the precautionary principle. The aim is to reactivate the productive apparatus as soon as possible in order to reduce social pressure, to control the outbreaks of protest that are already taking place in many municipalities due to the shortcomings of the assistance policies that have been put in place to deal with hunger and lack of income.
In the second emergency, decreed for 30 days on May 6, the government has continued with the printed line from the first social, economic and ecological emergency that had been on March 17, the minimalism. Only two decrees have been issued with any significance for the management of the crisis. The second one was to extend the first one, which took the measure of subsidizing with 40% of the minimum wage the salaries of all the companies constituted as legal entities for the next three months for larger companies. This measure, as was immediately pointed out, left out 72% of the small and medium enterprises that are family owned or naturally owned and that have not been incorporated as legal entities but pay taxes, are registered with the Chambers of Commerce as required by the regulations that govern them. Faced with this claim, the government had to correct the error and include these companies, which in my opinion is correct.
All these measures, barely represent, as Kalmanovitz points out, $5.7 trillion pesos or 0.67% of the GDP and all social spending on subsidies remains at an amount that does not exceed an additional 1.8% of the GDP, according to the International Monetary Fund, which has put forward an insufficient effort in the face of the economic damage that Colombian society is suffering. This amount is distributed as follows: 1% of GDP for additional health spending and 0.8% for transfers to households, VAT reduction and payroll subsidies. The Minister of Finance is also considering giving something to individuals who own small businesses that were excluded from the program, but, knowing this, it will not reach 0.1% of GDP. The dispute for an extraordinary basic income
In the midst of the minimalist public policies implemented by the Uribe-Duque Government to deal with the pandemic, various sectors are proposing more sensible and robust policies to meet the moment, which necessarily implies greater public spending which, as we have pointed out, may have different sources of funding: credit to the government by the Bank of the Republic, the use of between 10 and 15 billion dollars from international reserves, a progressive tax on the assets of super-rich sectors of society, a tax on large corporations and companies, the elimination of tax exemptions, all of which, or a combination thereof, would provide sufficient resources for more significant and inclusive policies to prevent hunger and enable the crisis to be overcome. One of them, which is technically very well documented and has achieved the support of 50 of the 108 senators of the Republic, is to approve an extraordinary basic income for three months to cover the minimum wage, some 380 dollars to some 4.7 million families.
The proposal presented by Luis Jorge Garay and Jorge Enrique Espitia proposes to grant an unconditional transfer to the most vulnerable households in the country of one (1) current legal minimum wage ($877,803 per month) for three months, as an extraordinary basic emergency income. This set of households could reach an order of 3 million. Thus, the fiscal cost of the proposal would be $7.9 trillion in the current year of 2020 (equivalent to 0.72% of GDP).
If the program were increased to cover 3,268,000 households in monetary poverty and they were given a legal minimum wage for three (3) months, the fiscal cost would amount to $8.6 billion in 2020 (0.79% of GDP). And for a universe of 4,768,000 households to access the emergency basic extraordinary income of a minimum wage for three months, the fiscal cost would amount to $13 billion in 2020 (1.2% of GDP)
The proposal, as we have pointed out, has been endorsed by 50 senators from the entire political spectrum, but it has had as its main promoters the senators of the so-called Alternative Bank, who have been joined by other sectors. Recently they had a meeting with Finance Minister Alberto Carrasquilla, who as one of the participants in the meeting jokingly heard the proposal and said he would study it, at least he did not kick us out, he added.
The measure is necessary but it requires great pressure to be approved and would constitute one alternative among other measures to face the hardship and hunger that is being experienced by the popular and working-class sectors of the country. It will be a struggle to fight for it and win, of that we have no doubt.
Featured image: Protest in Soacha demanding food