A new census portrays a very different country

COLOMBIA - Report 14 Nov 2018 by Juan Carlos Echeverry, Andres Escobar and Mauricio Santa Maria

Preliminary 2018 census results delivered many surprises, most posing severe challenges for future economic and social policies. First, there are 45.5 million people living in Colombia, not the 50 million many had been projecting for years. Among major public policy implications: we are richer than we thought, at about $6,500 per capita GDP. But many surveys used to measure employment, coverage rates of social services, poverty and quality of life were using inappropriate weighting factors. Fund allocations for policies carried out by regional governments will be affected, and will cause real havoc. Over the last five years, more than 800,000 Venezuelans immigrated to Colombia (unofficial estimates speak of 1.4 million). Most are poor, and expect to stay for a long time. It’s no small task for Colombia to deal with this major shock.

Colombia changed dramatically between 1993 and 2018, and is now similar to more developed countries. Social and fiscal policy will both have to change, and leave behind the characteristics that impede more dynamic growth, in order to eradicate poverty and to reduce inequalities.

Colombians would like to know how governance will be restored before yearend. President Iván Duque seems caught between two swinging blades. If he moves towards regaining a governmental coalition with the traditional parties, he’ll be portrayed by the left as reviving horse trading, and pork barrel politics. But if he tries to please the leftists, he’ll risk failing to get his reform agenda through Congress. These two blades might start looking like scissors to cut through government indecisiveness. Either the president forms a solid coalition in Congress, and displeases the left, or rethinks his legislative reform strategy, and decides that governing is different from legislating (hence taking a less Congress-intensive course).

Meanwhile, his ministers’ proposed reforms, on taxes, the judiciary, oil royalties, telecoms and anti-corruption keep piling up in Congress. The outlook for all of them is in doubt.

The tax/financing reform is the most likely to save the H2 2018 congressional sessions. But the idea of applying a VAT rate to staple goods -- key for increasing tax revenue -- seems doomed, starting with opposition from ex-president (and now senator) Álvaro Uribe, and Duque’s own Centro Democrático party. Finance Minister Alberto Carrasquilla is likely to soon come up with alternatives. Certainly, the government should aim for less tax collection, and more spending cuts. If we can see a final version, we’ll also learn a great deal about how problems will be solved in the future, and the associated political costs.

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