Bracing for the Worst Downturn in History
President Iván Duque’s early public health actions, among them a nationwide lockdown in March, were hailed as timely. These have been gradually eased since mid-April, and everyone hopes the health system can cope. Otherwise, Colombians might be returned to confinement. We’re all but certain that Colombia is in for the worst economic downturn in its history.
Yet evidence is inconclusive about whether the lockdown will pay off by keeping COVID-19 cases and deaths under control, and future lockdowns can’t be ruled out.
One indicator is the ability of Bogotá’s health sector to cope with severe cases. Bogotá has the highest concentration of cases, and new Mayor Claudia López seems to have less tolerance than other mayors for public health issues. She has warned that, if the percentage of ICU beds in use rises above 50%, she’ll impose mobility restrictions; above 70%, and everyone in Bogotá may be sent back home. As of June 10th, the figure was 48%. Let’s hope her administration takes a turn for the better, and produces increased ICU capacity soon.
A colorful mix of congressional representatives from various political persuasions has presented a “Basic Universal Income” (BUI) bill, as they consider government income support measures insufficient. The plan is to help the poor, at an estimated cost of COP 23.7 trillion for three months, or 2.3% of GDP. As others, Colombians are willing to accept a dose of Keynesian painkillers. The question is: should the COVID-19 social anesthesiologist be the minister of finance, Congress or both? And since patient-voters like opioids, and members of Congress like votes, will Colombia emerge from this pandemic with patients addicted to opioids, and members of Congress addicted to legislative populism?
Before the House of Representatives’ Budget Committee, Finance Minister Alberto Carrasquilla’s reaction was a mixture of bullet-dodging and doubling down. “[BUI] does not seem to me a short-term issue but rather a more structural one, aimed to replace Colombia’s current focalized transfers policy,” he said. “It could be replaced by a more universal approach where we would have some clearly identified destinations and a huge capacity of data gathering and processing.”
We have argued in favor of more aggressive support of household income. But since we don’t know how long lockdown and labor market collapse may last, this type of initiative may politically justify further transfers to families.
Just when more than 70% of Colombians thought Duque was sliding into lame duck territory, COVID-19 appeared to save his presidency, and to give his government a sense of purpose. After some early clashes with the leftist, vocal López, the two managed to strike a compromising tone.
The second state of economic emergency declared on May 6th ended on June 5th. Though the government issued many decrees that acquired the status of law, it refrained from changing pension system rules. If the cost of fighting COVID involves subsidizing well-off workers with absurdly generous pensions, that may be taking things way too far.
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