Between Borges and Defcon 3
One way of characterizing the latest on the external sector is that the factor payments deficit is fully offset by current transfers (remittances), leaving Colombia with a current account balance as big as its trade deficit. This could be a precarious equilibrium. In the event of a new global economic downturn, Colombians in Spain and the United States -- the biggest remittance senders -- could see their situations deteriorate. And one should not be surprised if remittances to Venezuela start appearing soon, upsetting the increasingly positive net value of current transfers.
This combination of high current account deficits, only partially financed by FDI, should encourage economic policymakers, using the American nuclear war readiness system as an analogy, to move from Defcon 4 to Defcon 3 (“increase in force readiness above that required for normal readiness”).
The Central Bank is among institutions that should be setting the dial to Defcon 3. But it is also facing a difficult dilemma, about whether to hike or cut rates. The argument for hiking is the gaping current account deficit and the risks of financing it under increased uncertainty. Too, fiscal policy might not produce all the adjustment it has promised. So we tend to side with the hawks.
In spite of protester’s claims, Colombia’s health care system basically works well; its education system has reached full coverage for school children, and university student enrollment has increased to more than 50%, though quality is uneven. In fact, Colombian protesters have quite a conservative agenda, since the origin of recent strikes was to protest against government reforms, namely, labor, pension, taxes and the creation of a government financial holding. Other demands were less concrete: fight corruption, improve government procurement, stop the killings of social leaders, achieve gender equality, an fracking and protect the environment.
The lack of unity of demands brings to mind a passage by the Argentinean celebrated and unforgettable writer Jorge Luis Borges, who quotes a “certain Chinese encyclopedia” in which it is written that “animals are divided into: (a) belonging to the Emperor (b) embalmed (c) tame (d) suckling pigs (e) sirens (f) fabulous (g) stray dogs (h) included in the present classification (i) frenzied (j) innumerable (k) drawn with a very fine camelhair brush (l) et cetera (m) having just broken the water pitcher (n) that from a long way off look like flies.”
The protesters’ (not Borges’) list suggests that they don’t consider things in Colombia that bad: that institutions may need some recalibration, but not a complete overhaul. This reformist approach differs from the radical new constitution the Chilean protesters are demanding.
Could political instability in Chile be a harbinger of problems to come in Colombia? Why has Peru not been contaminated with protests? Colombia presents a middle ground between Chile and Peru. Though crises have been numerous in Colombia of late, a deeply divided country is probably afraid of embracing an all-out institutional crisis.
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